Zero Hedge - Eurozonehttp://www.zerohedge.com/taxonomy/term/12167/0
enRussia-Europe Relationship: On The Threshold Of A New Erahttp://www.zerohedge.com/news/2016-12-08/russia-europe-relationship-threshold-new-era
<p><em><a href="http://www.strategic-culture.org/news/2016/12/07/russia-europe-relationship-on-threshold-new-era.html">Submitted by Alex Gorka via Stratgic-Culture.org,</a></em></p>
<p>Matteo Renzi resigned as the Italian Prime Minister after the people of Italy voted &laquo;no&raquo; in a historic referendum on constitutional reform on December 4. The vote results triggered a shock wave across Europe much like Brexit. It&rsquo;s up to Italian President Sergio Mattarella now to decide what will happen next &ndash; an appointment of new prime minister supported by parliamentary majority or a snap election, paving the way for an anti-euro party, the 5-Star Movement, to come to power.</p>
<p>This political force is the biggest winner. The party wants to abandon the EU budget strictures and has said it might favor printing a parallel currency. Another popular party &ndash; the Northern League &ndash; also opposes the eurozone membership. Actually, the opponents of the reform voted against the EU. An Italian &laquo;mini Brexit&raquo; becomes a possibility. Both - the 5-Star Movement and the Northern League &ndash; call for better relations with Russia. They want the anti-Russia sanctions to be lifted.</p>
<p><strong>The resignation of Mr. Renzi is a heavy blow to the EU already facing multiple crises and struggling to fend off an attack of anti-establishment forces, which are clearly on the rise in Europe. German Chancellor Angela Merkel &ndash; the unofficial European leader &ndash; is also vulnerable seeking a fourth term in 2017.</strong></p>
<p>Europe is facing a prolonged period of political upheaval, with elections also slated for 2017 in Germany, France the Netherlands and, probably, Italy &ndash; all countries where economic anxiety, opposition to the EU and a surge in migration have fed growing support for populist parties. <strong>The established order is in retreat everywhere in Europe, except Austria.</strong></p>
<p>Far-right leader Norbert Hofer of the anti-immigration Freedom Party was defeated on December 4 by independent candidate Alexander van der Bellen, a former Greens leader, becoming &laquo;a pro-European president of Austria open to the world.&raquo; But it was the vote when all Austrian political forces joined together against the Freedom Party&rsquo;s candidate. It was &laquo;all against one&raquo; but the result was a close call.</p>
<p><strong>From Moscow&rsquo;s perspective, any outcome was a step forward to bolster the forces willing to improve the relations between Russia and the EU.</strong> Mr. Hofer said he wanted to recognize Crimea as part of Russia. But both candidates stood for the improvement of bilateral relations with Moscow and supported the idea of lifting the anti-Russia sanctions to mirror the popular sentiment. After all, Austria was the only EU member state Russian President Vladimir Putin visited after the Western sanctions were imposed.</p>
<p>At his 45, Hofer is a promising politician. Only a year ago he was the second person in the leadership of the main opposition party and a vice-speaker of the parliament. Today he is the man who was close to becoming president. All other parties of the country had to unite preventing him from winning the presidential race. That&rsquo;s very indicative.</p>
<p>Austria will hold a parliamentary election next September. The Freedom Party has a good chance to win an outright majority of seats.</p>
<p><strong>The trend is visible. </strong>The Euro-Atlantic establishment suffers one defeat after another. It started with Brexit, followed by Trump&rsquo;s victory and election results in several European countries. Renzi&rsquo;s setback is a good example. The Eurosceptics won in Italy and lost in Austria but Hofer&rsquo;s Freedom Party is still going strong.</p>
<p><strong>Brussels has each and every reason to be concerned over its future.</strong> Anti-EU forces are expected to greatly improve their positions. With Donald Trump as US President, the pro-European integration forces face big problems. Trying to hold Eurosceptics at bay, the establishment forces will willy-nilly have to shift their policies towards national interests, a lesser role for the EU and its supranational structures.</p>
<p>It is taking place against the background of new&nbsp;<a href="http://www.strategic-culture.org/news/2016/08/08/alliances-inside-eu-undermining-unity-cohesion.html" target="_blank">alliances</a>&nbsp;emerging within the EU, like &laquo;<a href="http://www.strategic-culture.org/news/2016/08/08/alliances-inside-eu-undermining-unity-cohesion.html" target="_blank">Alliance of Europe&rsquo;s South</a>&raquo;&nbsp;or the &laquo;mini-Schengen&raquo; in addition to the already established and functioning Visegrad Group, which has its own vision of the European integration.</p>
<p><strong>With Donald Trump&rsquo;s priority to &laquo;America First&raquo;, the EU faces the need to take care of its&nbsp;<a href="http://www.strategic-culture.org/news/2016/09/13/europe-moving-away-from-the-us-become-more-independent.html">own security</a>&nbsp;which cannot be guaranteed without normalizing the relations with Moscow.</strong> Jean-Claude Juncker, the President of the European Commission, believes that Europe should adopt its own policy towards Russia, which would not be influenced by the US. The president&nbsp;<a href="http://www.euronews.com/2016/11/26/global-conversation-exclusive-interview-with-european-commission-president-jean" target="_blank">has said</a>&nbsp;he &laquo;would like to have an agreement with Russia that goes beyond the ordinary framework, bearing in mind that without Russia, there is no security architecture in Europe&raquo;. <strong>Mr. Juncker believes that &laquo;Russia must be treated as one big entity, as a proud nation&raquo;.</strong></p>
<p>In mid-November, Bulgaria and Moldova&nbsp;<a href="http://www.voanews.com/a/analysis-pro-russia-trends-in-bulgaria-moldova/3595445.html">voted</a>&nbsp;for leaders who called for lifting the sanctions and improving the relations with Moscow.</p>
<p>Western big business has&nbsp;<a href="file:///C:/Users/%D0%90%D0%BD%D0%B4%D1%80%D0%B5%D0%B9/Documents/SCF/EUROPEAN%20VOTE/Western%20companies,%20like%20IKEA,%20Leroy%20Merlin,%20Mars,%20Pfizer,%20have%20started%20to%20reinvest%20in%20Russia.%20They%20are%20pumping%20billions%20of%20dollars%20into%20Russian%20economy%20expecting%20the%20consumer%20demand%20in%20the%20country%20to%20grow">started to re-invest</a>&nbsp;in Russia. They would never risk doing it not being sure the investments were to pay off.</p>
<p>NATO &laquo;continues to strive for more constructive relations&nbsp;with Russia&raquo;, NATO Secretary General Jens Stoltenberg&nbsp;<a href="http://tass.com/world/916874" target="_blank">said</a>&nbsp;at a press conference on December 5 ahead of a meeting of the NATO countries&rsquo; foreign ministers. The date of the next NATO-Russia Council meeting is being discussed. More than a dozen European countries&nbsp;<a href="http://www.strategic-culture.org/news/2016/11/28/european-states-germany-want-arms-control-agreement-russia.html" target="_blank">have recently expressed</a>&nbsp;willingness to engage in dialogue with Russia toward reaching an arms control deal.</p>
<p><strong>The calls to lift the sanctions and improve the relationship with Moscow are growing stronger. </strong>The EU has started turning toward Russia. The trend is becoming increasingly apparent. The recent events clearly demonstrate that Russia and Europe are <strong>on the threshold of a new era in the history of their relationship.</strong></p>
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http://www.zerohedge.com/news/2016-12-08/russia-europe-relationship-threshold-new-era#comments5-Star MovementAlliance of EuropeBrexitBulgariaDonald TrumpEuropeEuropean CommissionEuropean integrationEuropean UnionEuropean UnionEuroscepticismEurozoneFranceFreedom partyGermanyGovernmentInternational relationsItalyJean-Claude JunckerMatteo RenziNetherlandsNorth Atlantic Treaty OrganizationNorthern LeaguePoliticsPolitics of EuropeRenzi CabinetUS Federal ReserveVladimir PutinVladimir PutinWithdrawal from the European UnionFri, 09 Dec 2016 00:18:00 +0000Tyler Durden580067 at http://www.zerohedge.comFrontrunning: December 8http://www.zerohedge.com/news/2016-12-08/frontrunning-december-8
<ul>
<li>Draghi Expected to Lay Out Plans for More ECB Stimulus (<a href="http://www.wsj.com/articles/five-questions-about-the-ecbs-meeting-1481176801">WSJ</a>)</li>
<li>Bonds Fall as Investors Turn Wary on ECB Stimulus; Euro Gains (<a href="http://www.bloomberg.com/news/articles/2016-12-07/asian-stocks-to-take-cue-from-u-s-as-bonds-rally-ahead-of-ecb">BBG</a>)</li>
<li>European Stock Traders Look to Draghi to Break Santa Curse&nbsp; (<a href="http://www.bloomberg.com/news/articles/2016-12-08/europe-stock-traders-look-to-draghi-to-break-2-year-santa-curse">BBG</a>)</li>
<li>Trump to nominate Pruitt to lead U.S. environmental agency (<a href="Trump to nominate Pruitt to lead U.S. environmental agency: statement">Reuters</a>)</li>
<li>Trump's choice of China envoy a positive sign for ties, Xinhua says (<a href="http://www.reuters.com/article/us-usa-trump-china-branstad-idUSKBN13X154">Reuters</a>)</li>
<li>Syrian Rebels Pin Hopes on Trump (<a href="http://www.wsj.com/articles/syrian-rebels-pin-hopes-on-trump-1481193000">WSJ</a>)</li>
<li>Trump Pick of EPA Foe to Lead Agency May Spark Senate Fight&nbsp; (<a href="http://www.bloomberg.com/politics/articles/2016-12-07/trump-s-pick-of-epa-foe-to-lead-agency-may-spark-senate-fight">BBG</a>)</li>
<li>Russia Sells Stake in Oil Giant Rosneft to Glencore, Qatar (<a href="http://www.wsj.com/articles/glencore-qatar-buy-stake-in-russian-oil-producer-rosneft-1481143830">WSJ</a>)</li>
<li>The Return of Glencore’s Dealmaking King (<a href="http://www.bloomberg.com/news/articles/2016-12-07/glencore-s-dealmaking-king-returns-with-wager-on-oil-and-putin">Bloomberg</a>)</li>
<li>Italian bank Intesa to help fund Rosneft deal for Glencore and Qatar (<a href="http://www.reuters.com/article/us-russia-rosneft-privatisation-intesa-idUSKBN13X0WT?feedType=RSS&amp;feedName=GCA-Commodities&amp;utm_source=dlvr.it&amp;utm_medium=twitter">Reuters</a>)</li>
<li>Sovereign-Wealth Funds Buy Stake in U.K. Gas Business (<a href="http://www.wsj.com/articles/sovereign-wealth-funds-buy-stake-in-national-grids-u-k-gas-distribution-unit-1481194914">WSJ</a>)</li>
<li>Monte Paschi Seeks ECB Reprieve as It Tries to Escape Bailout (<a href="http://www.bloomberg.com/news/articles/2016-12-07/monte-paschi-asks-ecb-for-more-time-to-complete-capital-increase">BBG</a>)</li>
<li>Vietnam dredging on South China Sea reef (<a href="http://www.reuters.com/article/us-southchinasea-vietnam-idUSKBN13X0WD">Reuters</a>)</li>
<li>Deutsche Bank May Have Rigged Index in Paschi Deal, Audit Shows (<a href="https://www.bloomberg.com/news/articles/2016-12-08/deutsche-bank-may-have-rigged-index-in-paschi-deal-audit-shows">BBG</a>)</li>
<li>Eyeing upswing, more U.S. oilfield service firms restructure (<a href="http://www.reuters.com/article/us-usa-energy-bankruptcy-analysis-idUSKBN13X0EG">Reuters</a>)</li>
<li>Michael Jordan Scores China Legal Victory for His Chinese Name&nbsp; (<a href="http://www.bloomberg.com/news/articles/2016-12-08/michael-jordan-wins-rights-to-his-chinese-name-in-china-court-iwftaroy">BBG</a>)</li>
<li>How Trump’s Web of Businesses Obscures Potential Conflicts (<a href="http://www.wsj.com/articles/how-donald-trumps-web-of-llcs-obscures-his-business-interests-1481193002">WSJ</a>)</li>
<li>Facebook’s Investors Criticize Marc Andreessen for Conflict of Interest (<a href="http://www.bloomberg.com/news/articles/2016-12-08/facebook-s-investors-criticize-marc-andreessen-for-conflict-of-interest">BBG</a>)</li>
<li>Merkel Sticks to Middle Ground in Risky Pitch for German Votes&nbsp; (<a href="http://www.bloomberg.com/news/articles/2016-12-08/merkel-sticks-to-middle-ground-in-risky-pitch-for-german-votes">BBG</a>)</li>
<li>China’s Banks Are Hiding More Than $2 Trillion in Loans (<a href="http://www.wsj.com/articles/chinas-banks-are-hiding-more-than-2-trillion-in-loans-1481130392">WSJ</a>)</li>
<li>Facebook’s Investors Criticize Marc Andreessen for Conflict of Interest&nbsp; (<a href="http://www.bloomberg.com/news/articles/2016-12-08/facebook-s-investors-criticize-marc-andreessen-for-conflict-of-interest">BBG</a>)</li>
</ul>
<p><strong>Overnight Media Digest</strong></p>
<p><em><span style="text-decoration: underline;">WSJ</span></em></p>
<p>- U.S. stocks posted their biggest rally since the election, sending major indexes to fresh records as investors increasingly conclude President-elect Donald Trump will be good for business and the economy. <a href="http://on.wsj.com/2h8mFLj" title="http://on.wsj.com/2h8mFLj">http://on.wsj.com/2h8mFLj</a></p>
<p>- The CEOs of AT&amp;T Inc and Time Warner Inc on Wednesday defended their proposed $85 billion merger to lawmakers, trying to navigate a tricky political landscape in which President-elect Donald Trump has expressed hostility to the deal. <a href="http://on.wsj.com/2hjV7yR" title="http://on.wsj.com/2hjV7yR">http://on.wsj.com/2hjV7yR</a></p>
<p>- President-elect Donald Trump on Wednesday chose Oklahoma Attorney General Scott Pruitt to lead the Environmental Protection Agency, according to a transition official, turning to a climate-change skeptic and sharp critic of the agency to take its helm. <a href="http://on.wsj.com/2gbVAae" title="http://on.wsj.com/2gbVAae">http://on.wsj.com/2gbVAae</a></p>
<p>- Rampant use of an accounting sleight of hand means Chinese banks don't have to set aside capital to cover potential losses, sowing fears of a crisis. <a href="http://on.wsj.com/2hkJhV0" title="http://on.wsj.com/2hkJhV0">http://on.wsj.com/2hkJhV0</a></p>
<p>- President-elect Donald Trump turned to a third retired military officer to help him run the country when he takes office in January, a move that represents an unusual level of military influence in the executive branch. <a href="http://on.wsj.com/2hlLn7r" title="http://on.wsj.com/2hlLn7r">http://on.wsj.com/2hlLn7r</a></p>
<p>- Passage of legislation aimed at speeding up Food and Drug Administration approvals, combined with an incoming president who has pledged to "cut red tape" at the agency, is expected to usher in a new, more industry-friendly era of drug and device regulation. <a href="http://on.wsj.com/2h7fbbb" title="http://on.wsj.com/2h7fbbb">http://on.wsj.com/2h7fbbb</a></p>
<p>- Syrian rebels on Wednesday proposed a civilian evacuation and negotiations over the future of Aleppo, a stark admission the opposition is all but defeated in a divided city seen as a bellwether in the country's nearly six-year war. <a href="http://on.wsj.com/2gb850P" title="http://on.wsj.com/2gb850P">http://on.wsj.com/2gb850P</a> </p>
<p>&nbsp;</p>
<p><em><span style="text-decoration: underline;">NYT</span></em></p>
<p>- The Russian government announced Wednesday that it will sell nearly 20 percent of its state oil company, Rosneft , to Swiss commodity trading firm Glencore and the sovereign wealth fund of Qatar. <a href="http://nyti.ms/2h8jqDt" title="http://nyti.ms/2h8jqDt">http://nyti.ms/2h8jqDt</a></p>
<p>- City Council in Portland in Oregon voted on Wednesday to impose a surtax on companies whose chief executives earn more than 100 times the median pay of their rank-and-file workers. The surcharge, which Portland officials said is the first in the nation linked to chief executives' pay, would be added to the city's business tax for those companies that exceed the pay threshold. <a href="http://nyti.ms/2h8kS90" title="http://nyti.ms/2h8kS90">http://nyti.ms/2h8kS90</a></p>
<p>- The European Central Bank is expected to say on Thursday that it will buy large quantities of government bonds and other assets for longer than initially planned, an attempt to protect the eurozone economy from an increasingly unpredictable political landscape. <a href="http://nyti.ms/2h8brWU" title="http://nyti.ms/2h8brWU">http://nyti.ms/2h8brWU</a></p>
<p>- China's highest court ruled largely in favor of former basketball star Michael Jordan on Thursday in a closely watched trademark case. The decision held that Jordan owns the legal rights to the Chinese characters of the equivalent of his name, overturning a lower-court ruling. The lawsuit pitted Jordan against Qiaodan Sports Company, which he accused of using the Mandarin transliteration of his name on its goods. <a href="http://nyti.ms/2h8kN5j" title="http://nyti.ms/2h8kN5j">http://nyti.ms/2h8kN5j</a></p>
<p>- President-elect Donald Trump is considering formally turning over the operational responsibility for his real estate company to his two adult sons, but he intends to keep a stake in the business and resist calls to divest, according to several people briefed on the discussions. <a href="http://nyti.ms/2h8fgLI" title="http://nyti.ms/2h8fgLI">http://nyti.ms/2h8fgLI</a></p>
<p>&nbsp;</p>
<p><em><span style="text-decoration: underline;">Canada</span></em></p>
<p>THE GLOBE AND MAIL</p>
<p>** The civil servant in charge of the government's spy-watchdog agency says Canada may have to reconsider how it shares intelligence with the United States if president-elect Donald Trump makes good on his promise to torture terrorists to gather intelligence. <a href="https://tgam.ca/2h6uqyd" title="https://tgam.ca/2h6uqyd">https://tgam.ca/2h6uqyd</a></p>
<p>** Chicago-based PrivateBancorp Inc. is postponing the shareholder vote for its $4.9-billion sale to Canadian Imperial Bank of Commerce, raising questions about whether CIBC will have to sweeten its bid next year. <a href="https://tgam.ca/2h6tkCy" title="https://tgam.ca/2h6tkCy">https://tgam.ca/2h6tkCy</a></p>
<p>** Canada is set to overhaul the way financial transactions are processed as changing technology and globalization reshapes the way individuals and businesses move money and access their funds. <a href="https://tgam.ca/2h6weYc" title="https://tgam.ca/2h6weYc">https://tgam.ca/2h6weYc</a></p>
<p>NATIONAL POST</p>
<p>** Ontario officials said the province's own land-use restrictions around its largest city have constrained the supply of detached homes. <a href="http://bit.ly/2h6wO88" title="http://bit.ly/2h6wO88">http://bit.ly/2h6wO88</a></p>
<p>** A major international union has taken the first step towards unionizing pilots at WestJet Airlines Ltd, taking over the work begun internally last year. <a href="http://bit.ly/2h6nJw6" title="http://bit.ly/2h6nJw6">http://bit.ly/2h6nJw6</a> </p>
http://www.zerohedge.com/news/2016-12-08/frontrunning-december-8#commentsAmerican people of German descentBBGBusinessChinaCity Council in PortlandClimate change skepticism and denialDeutsche BankDonald TrumpDonald TrumpEconomyEnvironmental Protection AgencyEuropean Central BankEuropean Central BankEurozoneFood and Drug AdministrationGlencoreMandarinMarc AndreessenMonte PaschiOklahomaReal estateReutersRosneftRussian governmentSouth ChinaThe ApprenticeTime WarnerTrumpWWE Hall of FameThu, 08 Dec 2016 12:21:01 +0000Tyler Durden580024 at http://www.zerohedge.comECB Preview: The Market's All-In But "There's A Significant Chance Draghi Disappoints"http://www.zerohedge.com/news/2016-12-07/ecb-preview-markets-all-theres-significant-chance-draghi-disappoints
<p><a href="http://www.wsj.com/articles/bond-investors-betting-on-more-ecb-stimulus-risk-disappointment-1481113761?mod=e2tweu">Blackrock&#39;s chief multi-asset strategist summed up</a> tomorrow&#39;s anxiously awaited ECB meeting best by noting that <strong><em>&quot;what&rsquo;s priced into markets is a fully fledged extension of the [bond-buying] program,&quot;</em></strong> but warns that, thanks to a muted reaction to the Italy vote and recent encouraging data, <strong><em>&quot;there&rsquo;s a significant chance the ECB disappoints markets.&quot;</em></strong> As bond traders bet on a six-month QE extension, Citi warns, <strong>anything less will be seen as hawkish</strong> and send EUR surging.</p>
<p>The ECB has a recent history of disappointing investors expecting more stimulus, and <a href="http://www.wsj.com/articles/bond-investors-betting-on-more-ecb-stimulus-risk-disappointment-1481113761?mod=e2tweu">as The Wall Street Journal reports,</a> with the bond-buying program scheduled to end in March, the<strong> ECB is running out of time to inform investors of its plans</strong>.</p>
<p><a href="http://www.zerohedge.com/news/2016-12-01/bunds-tumble-report-ecb-preparing-taper-bond-purchases">Just last week, Bunds had a mini taper tantrum when rumors spread</a>...</p>
<p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/12/02/20161207_ecb2.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/12/02/20161207_ecb2_0.jpg" style="width: 600px; height: 313px;" /></a></p>
<p>&nbsp;</p>
<p>And, even as investors expect more stimulus on Thursday, the debate with some analysts is moving to whether the ECB could start tapering its stimulus program in March.</p>
<blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Like other investors, Edward Farley, head of European corporate debt at PGIM Fixed Income, expects a six-month extension to the ECB&rsquo;s asset purchases. Still, he says <strong>he has been avoiding securities like southern European corporate bonds that look most vulnerable &ldquo;if there is any accident with central bank policy.&rdquo;</strong></p>
<p>&nbsp;</p>
<p>There is little sign investors expect that on Thursday.<strong> Peripheral government bonds and corporate debt has rallied this week despite the &ldquo;no&rdquo; vote in Italy&rsquo;s referendum </strong>which outgoing Prime Minister Matteo Renzi had presented as a way to revitalize Italy&rsquo;s stuttering economy.</p>
<p>&nbsp;</p>
<p><strong>Investors seemed unfazed by Mr. Renzi&rsquo;s resignation after the vote</strong> even though it could bolster the fortunes of the populist 5-Star Movement which has called for a non-binding referendum on Italy&rsquo;s membership of the euro.</p>
<p>&nbsp;</p>
<p><strong>The gap between 10-year Italian and German bond yields has narrowed by around 0.1 percentage point this week to around 1.54 percentage points</strong>. Media reports that the Italian government was ready to take a controlling stake in troubled lender Banca Monte dei Paschi di Siena seemed also to fuel the rally.</p>
<p>&nbsp;</p>
<p><strong>The spread to Germany, the bloc&rsquo;s largest economy, also narrowed for Portuguese, Spanish and French bonds.</strong></p>
<p>&nbsp;</p>
<p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/12/02/20161207_ecb1.jpg"><strong><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/12/02/20161207_ecb1_0.jpg" style="width: 600px; height: 310px;" /></strong></a></p>
</blockquote>
<p><strong>As far as the actual policy decision goes,</strong> the biggest problem for the central bank remains, as Bloomberg points out, that <strong>underlying inflationary pressure is too weak and shows no signs of picking up</strong>. Headline inflation accelerated a little in November, broadly in-line with the ECB&rsquo;s forecast of 0.5% for 4Q, but it looks to have done so thanks to movements in food prices. Core and services price inflation are stuck at 0.8% and 1.1%, respectively. And even though unemployment continues to fall, the wages data bring little cause for optimism. There&rsquo;s unlikely to be much movement in the core inflation forecasts, but revisions downward are more likely than upward.<strong> It will also be the first time forecasts for 2019 will be published -- how the ECB marks its own homework may help with understanding risks to the policy outlook</strong>.</p>
<p><strong>There remains no sign of underlying cost pressure building. Until there is, further easing looks inevitable. </strong>The Governing Council has faith in its tools -- it thinks inflation would have been lower if they had not been deployed -- and there is reason to keep using them. BI Economics therefore expects an extension to the program of asset purchases.</p>
<p>Economists seem to be split between those expecting the ECB to announce an extension by three or six months.</p>
<p>And with<strong> doves outnumbering hawks still on The ECB</strong>, it seems six months is more likely...</p>
<p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/12/02/20161207_ecb.jpg"><img height="403" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/12/02/20161207_ecb_0.jpg" width="600" /></a></p>
<p><strong>Economists highlight good reasons for the ECB to keep buying bonds. </strong>The central bank has an inflation target of close to 2% but consumer prices in the Eurozone were only 0.6% higher in November than the same month last year.</p>
<p><strong>Others argue further stimulus isn&rsquo;t warranted.</strong> The eurozone&rsquo;s economic picture is brighter, with business activity growing at its fastest pace this year in November, according to a survey of manufacturers and service providers.</p>
<p>As Citi strategist Steven Englander notes, <strong>nearly half of survey respondents expect ECB to extend QE by 6 months at current EU80b purchasing pace, writing that anything less than that outcome likely to be seen as hawkish and drive an &ldquo;immediate EUR buying outcome.&quot;</strong></p>
<ul>
<li><strong>20% expect ECB to engage in &ldquo;serious but limited&rdquo; tapering</strong></li>
<li>Two-thirds of respondents see ECB as being unaffected by Italian referendum</li>
</ul>
<p><u><strong>Which confirms Bloomberg&#39;s consensus...</strong></u></p>
<ul>
<li>An announcement that asset purchases will continue until June 2017, or beyond if necessary, at the present pace of 80 billion euros a month (risk: tilted to longer)</li>
<li>An increase to the issue limit to address bond scarcity (risk: balanced)</li>
<li>No commitment to taper asset purchases (risk: balanced).</li>
</ul>
<p>And beyond December...</p>
<ul>
<li>A further three-month extension of the asset purchase program to be announced in March 2017 (risk: tilted to longer)</li>
<li>Tapering of asset purchases to begin from September 2017 and for the program to end in March 2018 (risk: tilted to longer).</li>
</ul>
<p><strong>However, the market&rsquo;s subdued reaction to the Italian referendum may show that investors have become too reliant on the central bank to smooth over the eurozone&rsquo;s probelms, a factor that may concern some ECB officials.</strong></p>
<blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>&ldquo;I don&rsquo;t think that [argument] will win the day, but it&rsquo;s a risk,&rdquo; </strong>said Stefan Isaacs, deputy head of retail fixed income at M&amp;G Investments.<strong> It would be &ldquo;dangerous&rdquo; for the ECB to pull back before it has succeeded in boosting inflation, </strong>Mr. Isaacs said.</p>
</blockquote>
<p>As a reminder, last December, the euro jumped more than four cents against the dollar, stocks tumbled and the price of riskier bonds fell after the bank delivered a smaller-than-expected package of stimulus measures.</p>
<p>Finally, <a href="http://www.zerohedge.com/news/2016-12-01/bunds-tumble-report-ecb-preparing-taper-bond-purchases">as we detailed previously, </a><u><strong>there is another problem</strong></u>: with the US tightening at a time when demand for US debt will have to stay constant or rise to fund Trump&#39;s fiscal stimulus, it would be up to Japan and Europe to provide the &quot;helicopter money&quot; to fund US economic <a href="http://www.zerohedge.com/news/2016-11-22/helicopter-money-has-arrived-and-nobody-noticed-heres-why">growth as DB explained</a>. Even a small hint that this is going away, and suddenly the Trump stimulus is looking very shaky.</p>
<p>Sure enough, as Reuters admits, some proponents of the extension <strong>fear an ill-timed signal about reduced buying in future could heighten market volatility, potentially undoing some of the benefits of the scheme</strong>.</p>
<p>To be sure, it is not a done deal yet:</p>
<blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Extending the asset buys would require the ECB to ease some of its self-imposed restrictions, a sensitive debate as most options on the table raise legal or political concerns, facing varying degrees of opposition within the Governing Council.</p>
<p>&nbsp;</p>
<p>Still, ECB President Mario Draghi seemed to dismiss those concerns this week, arguing that the program was sufficiently flexible, suggesting that parameter changes would not stand in the way if policymakers opted for the extension.</p>
</blockquote>
<p>However, givem the current spate of economic and political events, it just may be that a tapering announcement by the ECB is the catalyst that finally blows over the house of cards market that has soared since November 8 on nothing but hope and lack of concrete news.</p>
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http://www.zerohedge.com/news/2016-12-07/ecb-preview-markets-all-theres-significant-chance-draghi-disappoints#comments5-Star MovementBlackrockBondBondBusinessCentral banksConsumer PricesCurrencyEconomic policyEconomyEconomy of the European UnionEuroEuropean UnionEurozoneEurozonefixedFixed incomeGermanyGoverning CouncilHelicopter moneyItalian governmentItalyJapanMario DraghiMonetary policyOpen market operationPeripheral governmentReutersSteven EnglanderUnemploymentVolatilityWall Street JournalThu, 08 Dec 2016 01:35:00 +0000Tyler Durden579969 at http://www.zerohedge.comItaly Threatens ECB With Blackmail; Demands More Time For Monte Paschi Rescuehttp://www.zerohedge.com/news/2016-12-07/italy-threatens-ecb-blackmail-demands-more-time-monte-paschi-rescue
<p>Last night we <a href="http://www.zerohedge.com/news/2016-12-06/italian-government-prepares-nationalize-monte-paschi">reported </a>that according to Reuters, with a private bailout off the table now that Italy is in political limbo, a nationalization in the form of a government debt-to-equity bailout of Monte Paschi was imminent, however there was a snag: political opposition from Brussels - which has insisted on a bail-in resolution mechanism instead of a bail out - could scuttle the transaction which is meant to make whole junior bondholders - mostly retail investors - courtesy of other taxpayers. The alternative was to request more time from the ECB, which has previously given Monte Paschi a year end deadline.</p>
<p>Now, <a href="https://www.ft.com/content/aa307d86-bc9f-11e6-8b45-b8b81dd5d080">according to the FT</a>, we learn that Rome is demanding the ECB give it more time to rescue the third largest Italian bank. That was to be expected, what is surprising, however, is that as the FT adds, <strong>Italy is "preparing to blame the bank for losses imposed on bondholders if Rome is forced into an urgent state bailout</strong>", a negotiating tactic some could call blackmail. </p>
<p>Citing four people "close to the issue", the FT adds that the board of MPS, which has the Italian Treasury as its largest shareholder, is asking the supervisory arm of the European Central Bank to give it until mid-January to pull off a €5bn equity injection and try to avoid forcing losses on some debtholders as required under new EU bailout rules. In a letter to the ECB, MPS says political instability unleashed by the resignation of prime minister Matteo Renzi following his defeat in Sunday’s referendum has made it impossible to get the deal done until a new government is formed, these people say.</p>
<p>If the ECB fails to approve the extension, MPS could be heading for a recapitalisation by the Italian state in the next few days. That would be only the beginning as contagion would soon follows:</p>
<blockquote><div class="quote_start">
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<p><strong>At stake is the stability of the Italian banking system and the potential wider repercussions on Europe’s financial system</strong>, which continues to struggle to recover from the eurozone debt crisis of 2010. </p>
</blockquote>
<p>A "precautionary recapitalisation" would involve imposing losses on subordinated debtholders and the indemnification of retail bondholders, the people said. It would also likely be frowned upon by Merkel and Schauble. The ECB is due to review the request as early as Thursday. The ECB is understood to be unwilling to reveal its position until a letter is received. But bankers argue the supervisor is under pressure to take a tougher stance on MPS, which failed the European banks’ healthcheck in 2014 and 2016, potentially paving the way for the latest stand-off between Italy and EU authorities. </p>
<p>And this is where the blackmail comes in: <strong>“If they don’t give the extension, the ECB must take responsibility. They will be pushing the button,” said one person. “We are only asking for five more weeks.” </strong></p>
<p>Ironically, Italy's insolence is the direct result of the ECB's own actions. As the FT notes, "Italy has been emboldened to ask for an extension for MPS — which emerged as the weakest lender under European bank stress tests in 2014 and 2016 — <strong>after investors shrugged off Mr Renzi’s defeat, reducing the sense of urgency, say senior bankers." </strong></p>
<p>Of course, the only reason investors refused to sell and BTFD after the Renzi loss is because the ECB made it abundantly clear it would step in and prevent "market volatility" as was reported last week. </p>
<p>Italy's gambit may work: officials in Brussels have signaled they are willing to support Rome, suggesting that relatively calm markets after the vote have given Italy two months to come up with a solution for MPS with a new government in place. </p>
<blockquote><div class="quote_start">
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<p>Nonetheless, they say they expect the Siena-based bank will ultimately require a state “bail-in” of some debt holders.</p>
<p>&nbsp;</p>
<p>MPS had placed its hopes on a deal with Qatar’s sovereign wealth fund, which would have involved injecting up to €2bn of equity into MPS as a way of securing influence with Mr Renzi over the purchase of more desirable assets, insiders say. The departure of Mr Renzi — who refused a deal struck with Brussels in July to recapitalise the bank and bail-in bondholders, fearing it would lose him votes at the referendum — has thrown the Qatari deal into doubt.</p>
</blockquote>
<p>Meanwhile, other potential investors, such as US hedge funds, are asking for the new government — preferably led by finance minister Pier Carlo Padoan — to be in place before proceeding. They also want clarity on when national elections may take place. Potential investors would prefer a technocratic government to remain until the end of the legislature in spring 2018, said one person.</p>
<p>Considering today's market reaction, which has seen the S&amp;P hit new all time highs, it is unclear what is more bullish: a failure of BMPS which would launch another wholesale rescue operation by the ECB and trillions more in liquidity, or a happy ending to the bank which - at worst - will have been bailed out three times since the financial crisis. </p>
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http://www.zerohedge.com/news/2016-12-07/italy-threatens-ecb-blackmail-demands-more-time-monte-paschi-rescue#commentsBailoutBanca Monte dei Paschi di SienaBusinessEconomyEuropeEuropean Central BankEuropean Central BankEuropean Central BankEuropean debt crisisEuropean sovereign debt crisis timelineEuropean UnionEuropean UnionEurozoneEurozoneItalyMatteo RenziMonte PaschiNationalizationPolicy reactions to the Eurozone crisisReutersVolatilityWed, 07 Dec 2016 19:43:49 +0000Tyler Durden579939 at http://www.zerohedge.comSaxo Bank's 10 Outrageous Predictions For 2017: Brexit Never Happens, Bitcoin Surges, Fed Foldshttp://www.zerohedge.com/news/2016-12-07/saxo-banks-10-outrageous-predictions-2017-brexit-never-happens-bitcoin-surges-fed-fo
<p>Continuing in the tradition of making a<strong> selection of calls aimed at provoking conversation on what might surprise or shock the investment returns in the year ahead this year&#39;s predictions cover a range of scenarios,</strong> including a Chinese growth rebound, an Italian bank rally, Brexit giving way to Bremain and the EU&#39;s willingness to change in the face of populist backlash, among others. The Outrageous Predictions should not be considered Saxo&#39;s official market outlook, it is instead the <strong>events and market moves deemed outliers with huge potentials for upsetting consensus views.</strong></p>
<p><span><span>Steen Jakobsen</span></span>, Chief Economist at Saxo Bank, commented:</p>
<blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&nbsp;&quot;<strong>After a year in which reality has managed to surpass even seemingly unlikely calls</strong> - with the Brexit surprise and the US election outcome - the common theme for our Outrageous Predictions for 2017 is that desperate times call for desperate actions.</p>
<p>&nbsp;</p>
<p>&quot;<strong>With change always happening in times of crisis, 2017 may be a wakeup call which sees a real departure from the &#39;business as usual&#39;,</strong> both in central bank expansionism and government austerity policies which have characterized the post-2009 crisis.</p>
<p>&nbsp;</p>
<p>&quot;As some of <strong>our past outrageous predictions have turned out to be far less outrageous that at first thought,</strong> it is important that investors are aware of the range of possibilities outside of the market consensus so that they can make informed decisions, even in seemingly unlikely market scenarios.&quot;</p>
</blockquote>
<p>It is in this spirit that we release <a href="https://www.tradingfloor.com/publications/outrageous-predictions">Saxo Bank&#39;s Outrageous Predictions for 2017</a>:</p>
<ol type="1">
<li><u><strong>China GDP swells to 8% and the SHCOMP hits 5,000&nbsp;</strong></u><br /><span><span><span>China</span></span></span>&nbsp;understands that it has reached the end of the road of its manufacturing and infrastructure growth phase and, through a massive stimulus from fiscal and monetary policies, opens up capital markets to successfully steer a transition to consumption-led growth. This results in 8% growth in 2017, with the resurgence owing to the growth in the services sector. Euphoria over private consumption-driven growth sees the Shanghai Composite Index double from its 2016 level, surpassing 5,000.</li>
<li><u><strong>Desperate Fed follows BoJ lead to fix 10-year Treasuries at 1.5%&nbsp;</strong></u><br />As US dollar and US interest rates rise in increasingly painful fashion in 2017, the testosterone driven fiscal policy of the new US President leads US 10-year yields to reach 3%, causing market panic. On the verge of disaster, the Federal Reserve copies the Bank of&nbsp;<span><span><span>Japan&#39;s</span></span></span>&nbsp;Yield Curve Control, by fixing the 10-year Government yield at 1.5%, but from a different angle, effectively introducing QE4 or QE Endless. This in turn promptly stops the selloff in global equity and bond markets, leading to the biggest gain for bond markets in seven years. Critical voices are lost in the roar of yet another central bank-infused rally.</li>
<li><u><strong>High-yield default rate exceeds 25%&nbsp;</strong></u><br />With &nbsp;the long-term average default rate for high yield bonds being 3.77%, jumping during the US recessions of 1990, 2000 and 2009 to 16%, 10% and 12% respectively, 2017 sees default rates as high as 25%. As we reach the limits of central bank intervention, governments around the world move towards fiscal stimulus, leading to a rise in interest rates (ex&nbsp;<span><span><span>Japan</span></span></span>), thus steepening the yield curve dramatically. As trillions of corporate bonds face the world of hurt, the problem is exacerbated by a rotation away from bond funds, widening spreads and making refinancing of low grade debt impossible. With default rates reaching 25%, inefficient corporate actors are no longer viable allowing for a more efficient allocation of capital.</li>
<li><u><strong>Brexit never happens as the UK Bremains&nbsp;</strong></u><br />The global populist uprising, seen across both sides of the Atlantic, disciplines the EU leadership into a more cooperative stance towards the UK. As negotiations progress, the EU makes key concessions on immigration and on passporting rights for UK-based financial services firms, and by the time Article 50 is triggered and put before Parliament, it is turned down in favour of the new deal. The UK is kept within the EU&#39;s orbit, the Bank of&nbsp;<span><span><span>England</span></span></span>&nbsp;hikes the rate to 0.5% and EURGBP plummets to 0.7300 - invoking the symbolism of 1973, the year of UK&#39;s entry into the EEC.</li>
<li><u><strong>Doctor copper catches a cold</strong></u><br />Copper was one of the clear commodity winners following the US election; however in 2017 the market begins to realise that the new president will struggle to deliver the promised investments and the expected increase in copper demand fails to materialise. Faced with growing discontent at home, President Trump turns up the volume on protectionism, introducing trade barriers that will spell trouble for emerging markets as well as&nbsp;<span><span><span>Europe</span></span></span>. Global growth starts weakening while&nbsp;<span><span><span>China&#39;s</span></span></span>&nbsp;demand for industrial metals slows as it move towards a consumption-led growth. Once HG Copper breaches a trend-line support, going back all the way to 2002 at&nbsp;$2/lb, the floodgates open and a wave of speculative selling helps send copper down to the 2009 financial-crisis low at&nbsp;$1.25/lb.</li>
<li><u><strong>Huge gains for Bitcoin as cryptocurrencies rise&nbsp;</strong></u><br />Under President Trump the US fiscal spending increases the US budget deficit from&nbsp;$600 billion&nbsp;to&nbsp;$1.2-1.8 trillion. This causes US growth and inflation to sky rocket, forcing the Federal Reserve to accelerate the hike and the US dollar reaches new highs. This creates a domino effect in emerging markets, and particularly&nbsp;<span><span><span>China</span></span></span>, who start looking for alternatives to the fiat money system dominated by the US dollar and its over-reliance on US monetary policy. This leads to an increased popularity of cryptocurrency alternatives, with Bitcoin benefiting the most. As the banking systems and the sovereigns of&nbsp;<span><span><span>Russia</span></span></span>&nbsp;and&nbsp;<span><span><span>China</span></span></span>move to accept Bitcoin as a partial alternative to the USD, Bitcoin triples in value, from the current&nbsp;$700&nbsp;level to&nbsp;$2,100.</li>
<li><strong><u>US healthcare reform triggers sector panic&nbsp;</u></strong><br />Healthcare expenditure is around 17% of GDP compared to the world average of 10% and an increasing share of US population cannot pay for their medical bills. The initial relief rally in healthcare stocks after Trump&#39;s victory quickly fades into 2017 as investors realise that the administration will not go easy on healthcare but instead launches sweeping reforms of the unproductive and expensive US healthcare system. The Health Care Sector SPDF Fund ETF plunges 50% to&nbsp;$35, ending the most spectacular bull market in US equities since the financial crisis.</li>
<li><u><strong>Despite Trump, Mexican peso soars especially against CAD&nbsp;</strong></u><br />The market has drastically overestimated&nbsp;<span><span>Donald Trump&#39;s</span></span>&nbsp;true intention or even ability to crack down on trade with&nbsp;<span><span><span>Mexico</span></span></span>, allowing the beaten-down peso to surge. Meanwhile&nbsp;<span><span><span>Canada</span></span></span>&nbsp;suffers as higher interest rates initiate a credit crunch in the housing market. Canadian banks buckle under, forcing the Bank of&nbsp;<span><span><span>Canada</span></span></span>&nbsp;into quantitative easing mode and injecting capital into the financial system. Additionally, CAD underperforms as&nbsp;<span><span><span>Canada</span></span></span>&nbsp;enjoys far less of the US&#39; growth resurgence than it would have in the past because of the longstanding hollowing out of&nbsp;<span><span><span>Canada&#39;s</span></span></span>&nbsp;manufacturing base transformed from globalisation and years of an excessively strong currency. CADMXN corrects as much as 30% from 2016 highs.</li>
<li><u><strong>Italian banks are the best performing equity asset&nbsp;</strong></u><br />German banks are caught up in the spiral of negative interest rates and flat yield curves and can&#39;t access the capital markets. In the EU framework, a German bank bailout inevitably means an EU bank bailout, and this comes not a moment too soon for the Italian banks which are saddled with non-performing loans and a stagnant local economy. The new guarantee allows the banking system to recapitalise and a European Bad Debt Bank is established to clean up the balance sheet of the eurozone and get the bank credit mechanism to work again. Italian bank stocks rally more than 100%.</li>
<li><u><strong>EU stimulates growth through mutual euro bonds&nbsp;</strong></u><br />Faced with the success of populist parties in&nbsp;<span><span><span>Europe</span></span></span>, and with the dramatic victory of Geert Wilders far-right party in&nbsp;<span><span><span>the Netherlands</span></span></span>, traditional political parties begin moving away from austerity policies and favouring instead Keynesian-style policies launched by President Roosevelt post the 1929 crisis. The EU launches a stimulus six-year plan of&nbsp;EUR 630 billion&nbsp;backed by EU Commission President&nbsp;<span><span>Jean-Claude Juncker</span></span>, however to avoid dilution resulting from an increase in imports, the EU leaders announce the issuance of EU bonds, at first geared towards &euro;1 trillion of infrastructure investment, reinforcing the integration of the region and prompting capital inflows into the EU.</li>
</ol>
<p><a href="https://www.tradingfloor.com/publications/outrageous-predictions">The whole publication &quot;Outrageous Predictions for 2017&quot; and more details can be found here</a>:</p>
<p><iframe class="scribd_iframe_embed" data-aspect-ratio="0.75" data-auto-height="false" frameborder="0" height="600" id="doc_78990" scrolling="no" src="https://www.scribd.com/embeds/333526161/content?start_page=1&amp;view_mode=scroll&amp;access_key=key-9Gqa2QDXuJ1Z25skLu7Q&amp;show_recommendations=true" width="100%"></iframe></p>
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http://www.zerohedge.com/news/2016-12-07/saxo-banks-10-outrageous-predictions-2017-brexit-never-happens-bitcoin-surges-fed-fo#commentsBank of CanadaBank of EnglandBank of EnglandBank of JapanBank of JapanBitcoinBitcoinBondBudget DeficitBusinessCADCapital MarketsCentral bankChinaCopperdefaultDefault RateDonald TrumpEconomic policyEconomyEconomy of the European UnionEU CommissionEuropean UnionEurozoneEurozoneFederal ReserveFinancial crisis of 2007–2008Geert WildersHigh YieldHousing MarketJapanMexicoMonetary PolicyMonetary policyNetherlandsnon-performing loansPublic financeQuantitative EasingQuantitative easingRealitySaxo BankSovereignsSSE 50Stock market crashesUS Federal ReserveYield CurveYield curveWed, 07 Dec 2016 15:16:08 +0000Tyler Durden579899 at http://www.zerohedge.comBill Gross Reveals The "Global Establishment's Overall Plan" In Eight Simple Stepshttp://www.zerohedge.com/news/2016-12-06/bill-gross-reveals-global-establishments-overall-plan-eight-simple-steps
<p>Continuing his anti-establishment bent, in his latest letter "Red is the new black", Bill Gross first exposes the "<strong>current global establishment’s (including Trump’s) overall plan" </strong>consisting of 8 simple steps to "solve the global debt crisis" (yes, the sarcasm is oozing), at which point he goes on to say that "it pays to not fight the tiger until it becomes obvious that another plan will by necessity replace it" and adds "that time is not now, but growing populism and the increasing ineffectiveness of monetary policy suggest an eventual transition." </p>
<p>His monthly words of caution: “Red” (in some cases) may be the new “Green” when applied to future investment returns. Be careful – stay out of jail."</p>
<p><em>The full Bill Gross' latest monthly letter <a href="http://image.exct.net/lib/ff021270746501/m/10/Dec+2016+Bill+Gross+Investment+Outlook_December+2016_FINAL.pdf">courtesy of Janus</a></em></p>
<p><strong>Red is the New Green</strong></p>
<p>I’ve got nothing against national anthems, and I wouldn’t kneel even if I was Colin Kaepernick. I just think as a country, “America the Beautiful” might have been a better choice for ours and that in some cases, some words of “The Star Spangled Banner” don’t ring true. A few countries’ anthems are, in fact, quite pleasing to my ear. “O Canada” has a beautiful melody and words to match, although you’d probably have to be watching hockey to hear it. Our “Star Spangled Banner”? For me – not so much. I can sort of see the “rockets’ red glare”, but it’s hard to sing and quite long – especially if you’re waiting for the kickoff. But like I said, I have nothing against it, except maybe the last stanza. Not the “Home of the Brave” part. Having spent two years in Vietnam, ferrying Navy SEALs up the Mekong Delta, I witnessed a lot of bravery. Not me. I was duckin’ quicker than Bill Murray’s gopher in Caddyshack. The SEALs though. Yeah – tough guys – very brave. </p>
<p>I quarrel however, with the part about “Land of the Free”. Free? For almost all of us – “yes” – but for 3+ million of us? Not really. <strong>&nbsp;</strong></p>
<p><strong>Take a look at Chart I, and be honest if your eyes don’t bug out</strong>. <strong>More than any country on Earth – in total numbers, or as a percentage of the population, Americans are incarcerated, imprisoned – freedomless</strong>.</p>
<p> Of course there’s a legitimate explanation for many of them, but what’s the reason for the rest? Restrictive laws that went too far and tied judges’ hands: California’s “three strikes and you’re out” legislation, for one, that was approved by voters long ago but is perhaps outdated now due to the growing acceptance of marijuana. The privatization of prison management and ownership is even more damning. “Orange Is the New Black” focuses on race and classism themes, but there’s more to the show than that. I’d affirm lead character Aleida Diaz when she says, “We a for-profit prison now. We ain’t people no more. We bulk items, sardines in a can.” I spent one night in a Danish pokey 50 years ago for intoxication, and it was 18 hours too long. We owe it to 1-2 million orange clad prisoners to clean up the system and give validity to our own national anthem.</p>
<p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/11/29/trump%20prison.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/11/29/trump%20prison_0.jpg" width="500" height="323" /></a></p>
<p>&nbsp;</p>
<p>Well, solving the “Orange Is Not Free” dilemma may take time just as the solution to a global debt crisis (now seven years running) may take even longer. It helps though to understand what the plan is in order to invest accordingly. <strong>While I and others have been critical of its destructive, as opposed to constructive elements, it is the current global establishment’s (including Trump’s) overall plan, and the establishment’s emphatic “whatever it takes” monetary policies are the law of our financial markets</strong>. <strong>It pays to not fight the tiger until it becomes obvious that another plan will by necessity replace it. </strong>That time is not now, but growing populism and the increasing ineffectiveness of monetary policy suggest an eventual transition. But back to the beginning which was sometime around 2009/2010:</p>
<p><span style="text-decoration: underline;"><strong>How policymakers plan to solve a long-term global debt crisis</strong></span>:</p>
<ol>
<li>As in Japan, the Eurozone, the U.S., and the UK, <strong>central banks bought/buy increasing amounts of government debt (QE), then rebate all interest to their Treasuries and eventually extend bond maturities</strong>. Someday they might even “forgive” the debt. <strong>Poof! It’s gone.</strong></li>
<li>Keep interest rates artificially low to <strong>raise asset prices and bail out over-indebted zombie corporations and individuals</strong>. Extend and pretend.</li>
<li><strong>Talk about “normalization” to maintain as steep a yield curve as possible to help financial institutions with long-term liabilities</strong>, but normalize very, very slowly using financial repression.</li>
<li>Liberalize accounting rules to <strong>make some potentially “bankrupt” insurance companies and pension funds appear solvent</strong>. Puerto Rico, anyone?</li>
<li>Downgrade or never mention the low interest rate burden on household savers. <strong>Suggest it is a problem that eventually will be resolved by the “market”.</strong></li>
<li>Begin to emphasize “fiscal” as opposed to “monetary” policy, <strong>but never mention Keynes or significant increases in government deficit spending. </strong>Use the buzzwords of “infrastructure” spending and “lower taxes”. <strong>Everyone wants those potholes fixed, don’t they? Everyone wants lower taxes too!</strong></li>
<li>Promote capitalism – even though government controlled, near zero percent interest rates distort markets and ultimately corrupt capitalism as we once understood it. Reintroduce Laffer Curve logic to significantly lower corporate taxes. Foster hope. <strong>Discourage acknowledgement of abysmal productivity trends which are a critical test of an economic system’s effectiveness.</strong></li>
<li>If you are a policymaker or politician, <strong>plan to eventually retire from the Fed/Congress/ Executive Wing and claim it’ll be up to the Millennials now. </strong>If you are an active as opposed to passive investment manager, fight the developing trend of low fee ETFs and index funds. But expect to retire with a nest egg.</li>
</ol>
<p><strong>That’s the plan dear reader, and President-elect Trump’s policies fit neatly into numbers 6, 7 and 8. </strong>There’s no doubt that many aspects of Trump’s agenda are good for stocks and bad for bonds near term – tax cuts, deregulation, fiscal stimulus, etc. But longer term, investors must consider the negatives of Trump’s anti-globalization ideas which may restrict trade and negatively affect corporate profits. </p>
<p>In addition, the strong dollar weighs heavily on globalized corporations, especially tech stocks. Unconstrained strategies should increase cash and cash alternatives (such as high probability equity buy-out proposals). Bond durations and risk assets should be below benchmark targets.</p>
<p>On TV, “Orange Is the New Black” yet, in the markets, “<strong>Red” (in some cases) may be the new “Green” when applied to future investment returns. Be careful – stay out of jail.</strong></p>
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http://www.zerohedge.com/news/2016-12-06/bill-gross-reveals-global-establishments-overall-plan-eight-simple-steps#commentsBill GrossBondBusinessCentral BanksCongressDeficit SpendingEconomicsEconomyETCEurozoneFiscal policyfixedGovernment debtInsurance CompaniesJapanMonetary PolicyMonetary policyPublic spherePuerto RicoUS Federal ReserveYield CurveWed, 07 Dec 2016 00:25:50 +0000Tyler Durden579736 at http://www.zerohedge.comFitch Cuts Outlook For Italian Banks To Negative Due To High Bad Debt, Referendum Vote Riskshttp://www.zerohedge.com/news/2016-12-06/fitch-cuts-outlook-italian-banks-negative-due-high-bad-debt-referendum-vote-risks
<p>Moments ago Fitch added some more fuel to the Italian bank fire when it announce it has changed its outlook on Italian banks to negative, a reflection of "its increased vulnerability to shocks following the asset-quality deterioration in legacy portfolios. A step-up in pressure from authorities and market participants on the sector to reduce the very high levels of impaired loans has increased urgency and risks for Italian banks"</p>
<p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/11/29/italian%20banks%201.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/11/29/italian%20banks%201_0.jpg" width="500" height="219" /></a></p>
<p><em>From the <a href="https://www.fitchratings.com/site/pr/1015945">press release</a><br /></em></p>
<p><strong>Italian Banks Outlook Negative as Bad Debts Persist</strong><em><br /></em></p>
<p>Fitch Ratings-Milan/London-06 December 2016: The Negative Outlook for the Italian banking sector reflects its increased vulnerability to shocks following the asset-quality deterioration in legacy portfolios, Fitch Ratings says. <strong>A step-up in pressure from authorities and market participants on the sector to reduce the very high levels of impaired loans has increased urgency and risks for Italian banks. </strong></p>
<p>Profitability in the sector is frail. Disposals of non-performing loan portfolios could lead to losses that require additional capital. These are some of the factors driving the 2017 Outlook to Negative from Stable. Problems for a small number of distressed banks raising capital have added to these pressures. </p>
<p><strong>The "No" vote at the constitutional referendum has further heightened political uncertainty and possibly reduced the capacity to implement economic reforms</strong>. The risks from political instability were one factor that contributed to our revision of the Outlook on Italy's 'BBB+' sovereign rating to Negative in October. </p>
<p>The referendum result could also damage the recapitalisation plans of some Italian banks, most notably Banca Monte dei Paschi di Siena and UniCredit, and have negative implications for the broader banking sector, whose attractiveness with investors has already reduced significantly during 2016. The sector's ability to access the institutional markets for funding and capital, which has become more difficult and expensive this year, could deteriorate further. </p>
<p>Asset-quality ratios in Italy have reached levels that are much worse than averages in other eurozone countries. The gross impaired loan ratio reached above 15% for most rated Italian banks, with the unreserved amount often multiples of their Fitch Core Capital. Provisioning costs are likely to remain high as "unlikely to pay" exposures migrate to the doubtful category. </p>
<p>Banks are stepping up efforts to shrink doubtful loans and have included reduction targets in strategic plans. Several banks are working on portfolio disposals, some of which may be finalised this year. Some may use the government guarantee on senior securitisation transactions. Atlante, the rescue fund that is undertaking its second fundraising, is likely to invest in mezzanine tranches of some of these transactions.</p>
<p>Significant disposals that materially improve asset quality could be positive for ratings. However, the disposals are likely to result in further provisioning and possibly more capital shortfalls for the banks involved. Portfolio sales could also result in risk-weighted assets rising for the remaining loans if the sales affect loss-given-default estimates at banks using internal rating models. </p>
<p>Capitalisation will remain under pressure in 2017 with a weak earnings outlook limiting banks' ability to build capital. Low interest rates, tepid economic growth and fierce competition for healthy borrowers are challenges for earnings. Profitability could also be dented by restructuring costs as banks focus on cost-cutting. </p>
<p>We also believe regulators could require higher capital buffers from Italian banks to compensate for the risk in their large non-performing loan portfolios and for the large portion of Italian sovereign debt held. This could result in additional capital requirements at some banks. </p>
<p>*&nbsp; *&nbsp; *</p>
<p>Of course Italian bank stocks ignored this risk entirely and soared all day (and even BMPS ripped higher after exiting its limit down halt)</p>
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http://www.zerohedge.com/news/2016-12-06/fitch-cuts-outlook-italian-banks-negative-due-high-bad-debt-referendum-vote-risks#commentsBankBusinessEconomic historyEconomicsEconomyEurozoneFinancial crisis of 2007–2008FitchGreat RecessionItalyratingsSovereign DebtStock market crashesSubprime mortgage crisisSystemic riskTue, 06 Dec 2016 16:15:06 +0000Tyler Durden579753 at http://www.zerohedge.comGlobal Stocks Rise As Oil Dips; US Stock Futures And Dollar Flathttp://www.zerohedge.com/news/2016-12-06/global-stocks-rise-oil-dips-us-stock-futures-and-dollar-flat
<p>European and Asian markets rose, while U.S. index futures were little changed, with the Dow Jones Industrial Average pushing for yet another record, as traders digested the Italian referendum news, await the ECB's Thursday announcement and reflect in a notably quieter overnight session.&nbsp; Oil slipped from a 16-month high after 4 straight days of gains, as doubts emerged about how OPEC will implement the first supply curbs in eight years. European bonds gained with stocks.</p>
<p>The euro held firm on Tuesday, having seen a wild 3-cent swing in the wake of Italy's referendum, while the region's bond yields dipped in line with U.S. peers as oil saw its first fall for five days. Asian stocks saw their strongest day for 2 weeks overnight after Wall Street's Dow Jones index hit a record high, and Europe's main bourses struggled into positive territory as bumper German data helped settle an early wobble. </p>
<p>As concerns about Italy subsided for the time being, Italian bond yields were back below levels seen before Sunday's referendum defeat for the government, while the euro held at $1.0767 having bounced strongly from as low as $1.0505 on Monday, two days ahead of an ECB decision in which Mario Draghi is expected to extend QE by 6 months with little other adjustments.&nbsp; "The referendum result could put the ECB under pressure not to taper the asset purchase program but to extend it for six months beyond March (in its current form)," ING strategist Benjamin Schroeder said.</p>
<p>European shares rose on news that German industrial orders soared at the fastest pace for more than two years, stoking hopes that Europe's largest economy is set for an acceleration in the coming months.&nbsp; Factories saw demand climb 4.9 percent on the month despite bulk orders being lower than usual, the German economy ministry said. That was the biggest increase since July 2014 and far above the Reuters consensus forecast for a 0.6 percent rise.&nbsp; "The reading was very strong even without large-scale orders and that suggests it's more than just a flash in the pan," BayernLB economist Stefan Kipar said, noting that some firms might have brought orders forward.</p>
<p>The Stoxx Europe 600 Index gained 0.3%, adding to its 0.6% advance from Monday. Italy’s FTSE MIB Index gained ground, up 1.3%, helped by gains of more than 3 percent each by UniCredit SpA and Mediobanca SpA. Stoxx 600 energy producers tracked declines in oil prices, which retreated from the highest close in 16 months. The MSCI Emerging Markets Index jumped 0.9 percent.&nbsp; Financial shares in China weakened again, however, after the country's insurance regulator suspended an unlisted firm from selling some products a day after a warning about "barbaric" share acquisitions by asset managers. </p>
<p>In emerging markets, Turkey, where the lira has slumped to record lows in recent weeks, saw a warning from the head of the central bank that the weakness could cause the bank to miss its inflation targets early next year. In Asia, gold nudged off a 10-month low. MSCI's broadest index for the region bounced 0.7 percent, its biggest daily rise since Nov. 22, as Korea climbed 1.4 percent and Japan rose 0.4 percent. The Australian dollar led declines among major economies, falling 0.5 percent to 74.38 U.S. cents, after the nation’s central bank central bank kept interest rates unchanged and Governor Philip Lowe said “some slowing in the year-ended growth rate is likely.”</p>
<p>In an otherwise quiet session, where E-minis are currently unchanged before Tuesday’s release of factory and durable goods orders, which may confirm the U.S. economy is gaining strength and giving the Federal Reserve more reason to raise interest rates, and after the Dow Average swung back to gains Monday, increasing 0.2 percent to an all-time high, early trader focus was on crude. </p>
<p>Ending a 4-day winning streak, oil prices slipped on Tuesday as crude output rose in virtually every major export region despite plans by OPEC and Russia to cut production, triggering fears that a fuel glut that has dogged markets for over two years might last well into 2017. Brent futures were trading at $54.64 per barrel at 0935 GMT, down 30 cents from Monday's close; WTI was at $51.39 a barrel, down 40 cents. Traders and analysts cited by Reuters said the boost from last week's decision by OPEC to cut crude production had faded and the cartel's promise had been undermined by data showing rising production from within its member countries and Russia. </p>
<p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/11/29/opec%20pumping.png"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/11/29/opec%20pumping_0.png" width="500" height="281" /></a></p>
<p>"Most of the position adjustments that the OPEC decision forced upon traders have now run their course and it leaves the market exposed to profit taking," said Ole Hansen, head of commodities strategy at Saxo Bank, citing surveys pointing to record production from OPEC during November. "What's troubling is that the rise is coming from African producers, two of which are exempt from cutting production," he said. "The meeting on Saturday between OPEC and non-OPEC producers will be crucial in order to maintain the bullish sentiment seen since last Wednesday." OPEC's oil output set another record high in November, rising to 34.19 million barrels per day (bpd) from 33.82 million bpd in October, according to a Reuters survey based on shipping data and information from industry sources.</p>
<p>“It’s a headache for OPEC in terms of increase in production for Libya and Nigeria, definitely that’s a tricky part,” said Bjarne Schieldrop, chief commodities analyst at SEB Markets. “A lot of buying went on following the OPEC decision and now it’s sort of taking it quietly.”</p>
<p>In rates, Italy’s 10-year bond yield declined six basis points to 1.93 percent, almost erasing Monday’s increase of eight basis points. Yields on Portugal’s bonds with a similar due date decreased nine basis points to 3.61 percent, while Germany’s rose one basis point to 0.34 percent. Almost all economists surveyed by Bloomberg expect the ECB to announce on Thursday that its bond-buying program will be extended after March, and most foresee an extension of about six months at the current 80 billion euros ($85 billion) a month. Treasury 10-year yields were little changed at 2.39%.</p>
<p>* * * </p>
<p><strong>Bulletin Market Summary From RanSquawk</strong></p>
<ul>
<li>European indices are mixed this morning with more news filtering through from the Italian banking sector</li>
<li>A much calmer FX market today, but we continue to see Cable pushing higher, with a view to challenging the post Brexit lows seen just under 1.2800</li>
<li>Looking ahead, highlights include US Factory Orders and API Crude Oil Inventories</li>
</ul>
<p><strong>Market Snapshot</strong></p>
<ul>
<li>S&amp;P 500 futures up 0.1% to 2205.5</li>
<li>Stoxx 600 up 0.3% to 342</li>
<li>FTSE 100 down less than 0.1% to 6742</li>
<li>DAX up 0.1% to 10698</li>
<li>German 10Yr yield up less than 1bp to 0.34%</li>
<li>Italian 10Yr yield down 7bps to 1.92%</li>
<li>Spanish 10Yr yield down 6bps to 1.5%</li>
<li>S&amp;P GSCI Index down 0.1% to 389.6</li>
<li>MSCI Asia Pacific up 0.8% to 136</li>
<li>Nikkei 225 up 0.5% to 18361</li>
<li>Hang Seng up 0.8% to 22675</li>
<li>Shanghai Composite down 0.2% to 3200</li>
<li>S&amp;P/ASX 200 up 0.5% to 5429</li>
<li>US 10-yr yield down 1bp to 2.38%</li>
<li>Dollar Index unchanged at 100.09</li>
<li>WTI Crude futures down 0.4% to $51.59</li>
<li>Brent Futures down less than 0.1% to $54.91</li>
<li>Gold spot up 0.1% to $1,172</li>
<li>Silver spot up 0.4% to $16.82</li>
</ul>
<p><strong>Top Headlines:</strong></p>
<ul>
<li>Sanofi Said to Mull Counterbid for Actelion Amid J&amp;J Talks: French drugmaker said to work with advisers to weigh options</li>
<li>Utilities Entitled to Damages for Germany’s Atomic Exit: German constitutional court issues ruling in landmark case</li>
<li>Total, ExxonMobil, Cnooc, Pemex Win Mexico Deep-Water Blocks: Oil majors win blocks in Mexico’s first competitive deep-water oil auction</li>
<li>Drugmaker Genfit Said to Explore Options Including a Sale: NASH treatment maker said in talks with other drug companies</li>
<li>SoftBank’s Son Said to Plan Meeting With Trump in New York: Japanese tech company had sought to merge Sprint and T- Mobile</li>
<li>Fed Officials Eyeing Rate Hike See Path Tied to Fiscal Policies: Fed presidents from New York, Chicago, St. Louis spoke Monday, indicating Fed is close to meeting inflation, job goals</li>
<li>South Africa to Allow U.S. GM Corn Imports for First Time: Import clearance comes after worst drought since records began</li>
<li>South Korea’s Park Is Willing to Resign in April, Party Says: Opposition lawmakers still pressing for Park’s impeachment</li>
<li>United Technologies CEO Says Government Ties Affected Trump Deal: Regulatory, tax reform would benefit company, CEO Hayes says</li>
</ul>
<p><strong>Lookinag at Asian markets, </strong>stocks carried on the momentum from Wall St where Dow posted fresh record highs amid strength in tech and financials, while contagion fears in Europe had also dissipated. ASX 200 (+0.5%) traded higher and was led higher by the materials and mining sectors, while Nikkei 225 (+0.6%) was underpinned by financials. Chinese markets were mixed with Hang Seng (+0.8%) outperforming, while Shanghai Comp (+0.2%) lagged <strong>following a weak liquidity operation by the PBoC. </strong>10yr JGBs traded lower amid the heightened risk appetite in the region, with demand also dampened following an enhanced liquidity auction for 20yr, 30yr and 40yr JGBs which drew a lower b/c and wider spreads. <strong>RBA kept the Cash Rate unchanged at 1.50% as unanimously expected </strong>and stated that maintaining policy is consistent with sustainable economic growth and achieving the inflation target over time. RBA commented that the economy is continuing its transition from the mining investment boom and that some slowing in the year-ended growth rate is likely, before it picks up again. </p>
<p><em>Top Asian News</em></p>
<ul>
<li>Singapore and Australia Margin Rules to Start in March 2017: Australia has six-month transition period for variation margin</li>
<li>ICAP Showing Yuan Tumbling 8.8% Against Dollar Fuels Jitters: CFETS data show onshore spot rate rose amid weakening dollar</li>
<li>Samsung’s Lee in Crosshairs as Tycoons Grilled Over Scandal: Tycoons testify in connection with influence-peddling case</li>
<li>China’s Robot Boom Raises Yaskawa’s Prospects and Profile: Yaskawa President says he’s rejected several deal offers</li>
<li>RBA Holds Key Rate as Commodity Upswing Outweighs Slowdown: Annual growth figures predicted to slow in 3Q</li>
<li>Half-Point India Rate Cut Seen by Economist Amid Cash Chaos: Call by IIFL’s Datar is more aggressive than consensus outlook</li>
</ul>
<p><strong>In Europe, </strong>indices are slightly higher this morning (EUROSTOXX 50 +0.2%) with more news filtering through from the Italian banking sector, <strong>as sources suggest that Monte Paschi (BMPS IM) (-2.2%) board meeting is said to be delayed until Wednesday Or Thursday. </strong>Elsewhere, financials are bouncing back after losses seen yesterday, but this did coincide with broker upgrades for HSBC and SocGen. Also in equity markets spreadbetters are taking a hit (IG Group -30%) after FCA look to announce new rules for CFD trading accounts including increased margins and amendments to new customer bonus rules.<br />In fixed income markets, Bunds trade largely flat this morning as participants await the ECB meeting. Today we have also seen outperformance in peripheral yields and some narrowing of the German/French spread following reports of more French government stability as Bernard Cazeneuve named is French PM.</p>
<p><em>Top European News</em></p>
<ul>
<li>EU Said to Mull Seeking Post-Brexit Deal Before Transition Talk: Consensus forming on bloc’s Brexit position, EU officials say</li>
<li>ABN Amro to Sell $20 Billion of Private Banking Assets to LGT: ABN Amro agreed to sell its private-banking assets in Asia and the Middle East to Liechtenstein-based LGT to focus on its European operations</li>
<li>Monte Paschi Recapitalization Hangs in Balance After Debt Swap: Troubled lender releases final results of debt conversion, set to decide in coming days whether to proceed with plan</li>
</ul>
<p><strong>In currencies</strong>, the Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, was little changed after falling 0.4 percent Monday. The euro traded at $1.0773 after ending Monday up 0.9 percent, erasing an earlier slide of as much as 1.5 percent in the wake of the Italian vote. The Australian dollar led declines among major economies, falling 0.5 percent to 74.38 U.S. cents, after the nation’s central bank central bank kept interest rates unchanged and Governor Philip Lowe said “some slowing in the year-ended growth rate is likely.”</p>
<p><strong>In commodities, </strong>oil prices slipped on Tuesday as crude output rose in virtually every major export region despite plans by OPEC and Russia to cut production, triggering fears that a fuel glut that has dogged markets for over two years might last well into 2017. Brent futures were trading at $54.64 per barrel at 0935 GMT, down 30 cents from Monday's close; WTI was at $51.39 a barrel, down 40 cents. Traders and analysts cited by Reuters said the boost from last week's decision by OPEC to cut crude production had faded and the cartel's promise had been undermined by data showing rising production from within its member countries and Russia. "Most of the position adjustments that the OPEC decision forced upon traders have now run their course and it leaves the market exposed to profit taking," said Ole Hansen, head of commodities strategy at Saxo Bank, citing surveys pointing to record production from OPEC during November. "What's troubling is that the rise is coming from African producers, two of which are exempt from cutting production," he said. Aluminum fell 1.2 percent to $1,713 a metric ton, the biggest drop in a week. The metal will probably tumble next month as an “irrational” increase in prices prompts companies to restart plants, while new capacity also ramps up in the world’s largest supplier, according to China’s top metals industry group. Copper lost 1.4 percent and zinc slid 0.7 percent.</p>
<p><strong>Looking at the day ahead, </strong>the early data out this morning in Europe came from Germany where the October factory orders data was released, and came in an unexpectedly hot 6.3% Y/Y vs Exp. 1.6%, up from 2.9%. The final revisionsto Q3 GDP in the Euro area also came in and as expected, it remained at +0.3% qoq. In the US we’ll get the October trade balance reading, with the final Q3 nonfarm productivity and unit labour costs data also scheduled for release. Factory orders data for the month of October is also due along with this month’s IBD/TIPP economic optimism index reading. Lastly, final durable and capital goods orders revisions for October will be released.</p>
<p><strong>US Event Calendar</strong></p>
<ul>
<li>8:30am: Trade Balance, Oct., est. -$42.0b (prior -$36.4b)</li>
<li>8:30am: Non-farm Productivity, 3Q F, est. 3.3% (prior 3.1%) </li>
<li>8:55am: Redbook weekly sales</li>
<li>10am: Factory Orders, Oct., est. 2.6% (prior 0.3%) ; Durable Goods Orders, Oct. F, est. 3.4% (prior 4.8%); Capital Goods Orders Non-Defense Ex-Aircraft, Oct F (prior 0.4%)</li>
<li>10am: IBD/TIPP Economic Optimism, Dec. (est. 51.4)</li>
<li>4:30pm: API weekly oil inventories</li>
</ul>
<p><strong>DB's Jim Reid concludes the overnight wrap</strong></p>
<p>Had you known in advance the outcomes of all the three big events of the year (Brexit, US elections and the Italian referendum) would it have helped you make money? It's not obvious that it would, especially if your timing was slightly off. Clearly there are some assets where the impact would have been fairly obvious but the wider markets have been more difficult to second guess. For us the Italy 'no' result was relatively well priced in given the likely immediate ramifications but we still would have expected the jitters for longer than the 2 minutes the European markets took to bottom out yesterday morning. With Italy it's still possible that post the rejection everything stays similar in the government apart from PM Renzi who as we know tendered his resignation yesterday. So the market is giving Italy the benefit of the doubt for now even if there was some underperformance of Italian risk yesterday.</p>
<p>Indeed the FTSE MIB initially dropped -2.20% at the open but that fall proved short lived with the index then rebounding and peaking a shade above +1.50% a short time later. Thereafter, the index swung in and out of positive and negative territory before finishing the day down a modest -0.21%. That was in the context of a +0.56% gain for the Stoxx 600 and an impressive +1.63% jump for the DAX. Unsurprisingly much of the focus was on how banks would fare. While the Stoxx 600 banks index closed up a fairly resilient +0.76% there were notable heavy falls for the likes of Banco Popolare di Milano (-7.91%), Banco Popolare (-7.44%), Mediobanca (-4.24%) and Unicredit (-3.36%) as the market questioned the likelihood of some of the ongoing bank recapitalisation plans going ahead.<br />It was a similar story in credit markets although the underperformance of financials generally was more obvious. The iTraxx Main index ended the day little changed but did wipe out an early 3bp move wider, while the iTraxx Crossover index finished 5bps tighter. Senior financials did end 3bps wider however while subordinated financials were over 6bps wider by the end of play. Of the four Italian banks within the latter index, Mediobanca spreads were 3bps wider while spreads for Intesa Sanpaolo, Generali and Unicredit were 8bps to 10bps wider. So some underperformance but as we mentioned at the top perhaps some signs that the market is giving Italy the benefit of the doubt for now.</p>
<p>Over in sovereign bond markets 10y BTP yields finished the day 8.3bps higher at 1.981% which compares to a 5.0bp move higher for similar maturity Bund yields. The remainder of the periphery was actually little changed. Elsewhere the Euro traded in a near 3% range. After tumbling as much as -1.50% early in the Asia session it then rallied as Europe kicked into gear and actually closed up +0.94% on the day. The US session was for the most part a reflection of the reasonably positive sentiment. The S&amp;P 500 closed up +0.58% and 10y Treasury yields ended a modest 1bp higher at a shade below 2.400%.<br />While we expect the political situation to move fairly swiftly it’s still worth considering the medium-term consequences for Italy in the wake of the result. In his note following the result yesterday, DB’s Marco Stringa made the important reminder that the referendum was a catalyst rather than the cause of Italy’s complex situation. The complexity is due to disappointing growth, concerns about the banking system and the rise of populist and euro-sceptic parties. At least initially, Marco does not expect to revise down GDP projections as the "No" outcome was his central case scenario. The likelihood of a systemic solution for the NPL issue will influence the medium-term evolution of the Italian banking sector and banks' ability to support investment growth. Marco expects no pro-active systemic solution for the banking sector before the next election. He also expects a new electoral law for both Houses of the Parliament. In his opinion, it is important that a compromise on a new electoral law does not lead to a system that encourages the formation of governments supported by overly heterogeneous coalitions. </p>
<p>Politics was the overwhelmingly dominating theme throughout yesterday. Along with digesting the Italian referendum outcome, there was also some focus on a Sunday Times article confirming the UK Government’s plans to potentially pay into the EU budget for access to the single market, something which PM May is calling a ‘grey Brexit’, i.e. in between the black and white demands of leave and remain hardliners. So further evidence that the UK government is becoming increasingly pragmatic from the early hard line stance. As a reminder the Supreme Court hearing continues today.</p>
<p>Elsewhere, news also tricked in late in the day that Eurozone finance ministers had agreed to provide short term debt relief measures for Greece prepared by the European Stability Mechanism, although they seemingly failed to form a consensus on a broader accord for various reform targets and measures. Significantly, the participation of the IMF in the bailout program appears to still be up in the air with talks breaking up last night over splits in the various reform targets. According to the FT, Eurogroup President, Jeroen Dijsselbloem, confirmed that getting the IMF on board by the end of the year is unlikely and that instead talks will continue into the New Year. Meanwhile over in France, the latest update there is that Prime Minister Manuel Valls has declared that he will run for presidency as had been somewhat expected following the news that Hollande had ruled himself out of contention.</p>
<p>Refreshing our screens this morning it’s been a broadly positive session in Asia this morning. Markets have largely followed the lead from the moves in Europe and on Wall Street last night with the Nikkei (+0.53%), Hang Seng (+0.86%), Shanghai Comp (+0.08%), Kospi (+1.32%) and ASX (+0.81%) all edging higher. EM currencies are also generally a touch stronger, while the Aussie Dollar has weakened modestly (about -0.17% as type) after the RBA left rates on hold as expected.</p>
<p>Moving on. As far as the economic data was concerned yesterday, it was on the whole relatively positive. The primary focus in the US was on the November ISM non-manufacturing print which was reported as rising 2.4pts to 57.2 and well exceeding expectations for a rise to 55.5. That is in fact the best reading since October 2015 and whilst the details revealed a modest decline in new orders (by 0.7pts to 57.0) there were gains across components of business activity, employment and new export orders. It was noted that the employment component in particular, which came in at 58.2, is the 5th largest print since the start of the series in 1997. Meanwhile, the final services PMI reading for November was revised down a modest 0.1pts to 54.6 which puts the composite at 54.9 and unchanged versus October. Lastly the labour market conditions index for November was reported as rising by 1.5pts in November which is the best monthly gain since July.</p>
<p>In Europe the data was focused on the final November PMI readings. There was a bit of disappointment in the final services revision for the Euro area which was revised down from 54.1 to 53.8 largely as a result of a 1pt downward revision in France to 51.6. Putting it in context however that reading for the Euro area is still the highest this year while the composite level of 53.9 is also the highest in 2016. The most interesting takeaway was the data for the non-core and specifically Italy where the services reading printed at a bumper 53.3 (vs. 51.6 expected), up 2.3pts from October and the highest level since February. Our European economists highlighted that, should the data for the Euro area remain unchanged in December, then the composite PMI would point to GDP growth of +0.4% qoq in Q4 and so represents some upside to their current estimate.</p>
<p>Before we look at today’s calendar, yesterday also marked the last day for Fedspeak prior the blackout period kicking in, although again there was little new that could move the dial. NY Fed President William Dudley opined that ‘it is important that fiscal and monetary policy are well aligned going forward’ and that ‘there appears to be few imbalances in the economy that could lead to the current expansion ending’. Perhaps more interestingly, Dudley acknowledged the recent tightening in financial conditions but also suggested that that he does not see this as prompting great concern and instead said that it seems broadly consistent given that it’s being driven by a greater likelihood of stronger near-term aggregate demand and less downside risk to the growth outlook. Meanwhile Chicago Fed President Charles Evans said that the Fed needs to be patient to ‘see what fiscal program emerges’ but that he see’s every reason to think that the economy is to ‘stay strong for the next few years given Trump administration’s planned policies’.</p>
<p>Looking at the day ahead, the early data out this morning in Europe comes from Germany where the October factory orders data will be released. Later this morning we’ll get the final revisions to Q3 GDP in the Euro area along with the growth components. No change from the +0.3% qoq flash print is expected. This afternoon in the US we’ll firstly get the October trade balance reading, with the final Q3 nonfarm productivity and unit labour costs data also scheduled for release. Factory orders data for the month of October is also due along with this month’s IBD/TIPP economic optimism index reading. Lastly, final durable and capital goods orders revisions for October will be released.</p>
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http://www.zerohedge.com/news/2016-12-06/global-stocks-rise-oil-dips-us-stock-futures-and-dollar-flat#commentsAPIASX 200AussieAustraliaAustralian DollarB+Bloomberg Dollar SpotBondBusinessBusinessCartelsChicago FedChinaCommodity marketsCopperCrudeCrude OilDAX 30Dow 30Dow Jones Industrial AverageEconomyEniEquity MarketsEuro Stoxx 50European Central BankEuropean UnionEUROSTOXX 50Eurozonefederal governmentFederal ReservefixedflashFranceFrench governmentFTSE 100FTSE MIBGermanyGreeceheadlinesIndiaInternational Monetary FundItalyJapanJim ReidMarket ConditionsMexicoMiddle EastMiddle EastMonetary PolicyMonte PaschiMSCI Emerging MarketsNikkeiNikkei 225NY FedOPECOPECOrganization of Petroleum-Exporting CountriesPeople's Bank of ChinaPetroleumPetroleum industryPrice of oilReserve Bank of AustraliaReutersS&P 500S&P GSCISaxo BankSocGenSTOXXStoxx 600Stoxx 600 BanksStoxx 600 energySupreme CourtTrade BalanceTrump AdministrationTurkeyUK GovernmentUS Federal ReserveWilliam DudleyYuanTue, 06 Dec 2016 11:36:54 +0000Tyler Durden579716 at http://www.zerohedge.comA Look At This Week's "Other" Big Eventhttp://www.zerohedge.com/news/2016-12-05/look-weeks-other-big-event-what-expect-mario-draghi-thursday
<p>With the Italian referendum now in the rearview mirror, the market's attention focuses on this Thursday's second most important event, the ECB meeting on Thursday. Here the biggest question is whether, alongside the now widely expected extension of the ECB's QE which is set to mature in March 2017, and which most analysts believe will be prolonged until at least September 2017, Mario Draghi will also announce some form of tightening or tapering of QE purchases or an eventual formal ending of its asset purchases, as Reuters hinted in a trial balloon report last week. </p>
<p>As readers will recall, on December 1 <a href="http://www.zerohedge.com/news/2016-12-01/bunds-tumble-report-ecb-preparing-taper-bond-purchases">Reuters reported </a>that in advance of its March 2017 meeting, the ECB was considering sending a "<em>formal signal after its policy meeting next Thursday that the program will eventually end</em>." It added that skeptics of more stimulus on the bank's Governing Council "have accepted that an extension beyond the current expiry date of March is inevitable given weak underlying inflation and heightened political risk." </p>
<p>The question remains how to structure that extension.&nbsp; According to report, much of the preparatory staff work had focused on a six-month extension at a steady pace of 80 billion euros per month, an option favored by many as growth is sluggish, inflation lacks momentum and political risk from key elections keeps the chances of market volatility high, three sources said. But some have indicated they would favor an extension at lower volumes, for example nine months at 60 billion euros a month, fearing that a straight extension could make the program appear open-ended, two of the sources said. </p>
<p>A compromise under discussion would be to signal the program's eventual end, possibly in the bank's forward guidance, indicating that the purchases cannot be extended indefinitely. Another option is not to specify monthly purchase volumes, essentially making them dependent on economic developments, the sources said, similar to what the BOJ has done with its curve control operation. That would allow the ECB to buy up to 80 billion euros without requiring it to spend the full amount.</p>
<p>Of course, any formal tapering announcement could jolt the European (and global) bond market, in a redux of the infamous 2013 Bernanke "Taper Tantrum", which coming at a very sensitive stage for Europe, in the aftermath of the Italian referendum, seems unlikely.</p>
<p>The Reuters report laid out the tensions between the hawks, pushing for tapering, and the doves, who insist on simply extending the program as is, with perhaps some modest tweaks. </p>
<p>What do others think?&nbsp; Below we lay out some summary scenarios as laid out by Wall Street banks:</p>
<p><strong>According to Deutsche Bank, </strong>the ECB will announce a 6-month extension of the current €80bn QE programme (an extension from March 2017 to September 2017). This is likely to be complemented by a move to improve the supply of eligible bonds, perhaps by the removal or softening of the yield floor. <strong>This would facilitate a steeper yield curve and incentive transmission. </strong>In an alternative scenario DB economists believe that the market would react negatively to say a slowing in the pace of purchases to €60bn. The bank's economists have derived three rules that need to be satisfied by spot and forward core inflation in order for the ECB to taper. The soonest these are likely to be satisfied is mid-2017. They go on to highlight that if the ECB’s above-consensus view on growth is correct, the euro exchange rate depreciates in line with DB’s house view and systematic financial crisis is avoided, <strong>tapering could be announced in June 2017. </strong>On the other hand if their below-consensus view on growth is correct and the growth/inflation relationship is weak, <strong>tapering could wait until end-2017</strong>. The last thing to note is today’s market reaction to the referendum result which also has the potential to influence Thursday’s meeting actions.</p>
<p>* * * </p>
<p><strong>According to Bank of America, </strong>the central scenario is likewise of a 6 month extension at €80bn per month via minor tweaks in the capital key. The reaction of Bunds will ultimately be more a function of the changes to the securities’ lending programmes than QE itself. For the periphery, the bank distinguishes between Italy – where the referendum and the fate of the pending bank capital raises will dominate – and the rest. BofA believes that addressing repo issues should be at the top of the ECB’s priority list. Solving the richness of GC would make a straightforward 12 m extension in QE feasible. As Bank of America notes, figuring out what is priced in has become more difficult on the back of the repo squeeze in the front-end of the German curve – and not helped by conflicting ECB rhetoric. Schatz trades at -40 bp to OIS, a new post 2008 record. The market impact of ECB action next week therefore needs to be assessed against the following: </p>
<ul>
<li>Has the ECB taken credible steps to address the collateral squeeze in front-end triple-As in particular?</li>
<li>Will the QE extension involve buying less German government bonds in future?</li>
<li>Is QE extended in such a way that risk premia in the periphery can be expected to retrace or at least stabilise?</li>
<li>Does the ECB maintain a sufficiently accommodative monetary policy stance such that current levels of breakevens and forward EONIAs can be justified</li>
</ul>
<p>The tables below summarise the bank's views on the reaction of both Bund yields and the German curve, as well as the periphery in four stylized scenarios. Its economists distinguish the different modalities of QE extensions and different approaches to the repo issues discussed in depth previously. The focus is on short-term market reactions, since it believes that a renewed commitment to large QE purchases (80bn/m for 6m) or long-term ones (60bn/m for 9am) will be a sufficiently positive surprise to the market to avoid the debate of how to assess fair value in the periphery in a world without QE.</p>
<p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/11/29/ECB%20BOFA%201.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/11/29/ECB%20BOFA%201_0.jpg" width="500" height="137" /></a></p>
<p>The table below assumes a directionality in peripheral spreads. BofA believes that the biggest risk to the periphery is higher Bund yields. It therefore assumes that a flow driven repricing of Bund yields lower, will also have positive spill-over effects for the periphery.</p>
<p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/11/29/ECB%20BOFA%202.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/11/29/ECB%20BOFA%202_0.jpg" width="500" height="113" /></a></p>
<p>The next table lays out what options deliver what extensions to the ECB. BofA highlights that with an effective policy addressing the richness of (German) GC, extending QE becomes very easy without&nbsp; having to tackle exogenous constraints such as the depo rate floor, or indeed the capital constraint. <strong>Addressing repo issues should actually be at the top of the ECB’s priority list for next week</strong>. Solving the richness of GC should make the 4y sector available for purchase, which in combination with raising the limits on non-CAC bonds, makes a 12 m extension in QE feasible without getting into difficult political discussions (see purple cells in table below).</p>
<p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/11/29/ECB%20BOFA%203.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/11/29/ECB%20BOFA%203_0.jpg" width="500" height="147" /></a></p>
<p>BofA concludes as follows: "Going into next week’s meeting, and with more than the usual uncertainty around the details of the announcement, the chosen rhetoric, the on-going repo issues, the Italian referendum and bank recap stories, we have little risk appetite."</p>
<p>* * * </p>
<p><strong>Finally, according to UBS, </strong>the ECB will play it safe next week, and will extend QE in its current format (€80Bn monthly) for six month until Sept 2017, echoing the other two banks. UBS says that while the new staff macroeconomic forecasts for 2017-19 will form an important basis for the decision, it thinks the members of the ECB Governing Council will have to take an even more comprehensive view, evaluate the broader balance of risks, and ask themselves whether the time is ripe for a reduction in monetary stimulus. In this context, the GC will also have to consider the implications of political events, such as the outcome of the Italian constitutional referendum on 4 December and the sharp rise in global bond yields which has probably led to an (unwelcome) tightening of financial conditions in Europe. UBS currently expects the ECB to taper after September 2017, perhaps over the course of one year. <strong>The Swiss bank does not think ECB policy rates will be cut further, but rate hikes are unlikely before 2019.</strong></p>
<p>UBS notes that in his recent speeches, ECB President Draghi made the case for an ongoing strong degree of monetary accommodation. Speaking in front of the European Parliament on 21 November, he said "[T]he return of inflation towards our objective still relies on the continuation of the current, unprecedented level of monetary support, in spite of the gradual closing of the output gap. It is for this reason that we remain committed to preserving the very substantial degree of monetary accommodation necessary to secure a sustained convergence of inflation towards levels below, but close to, 2% over the medium term."</p>
<p>The Swiss bank notes that its base case scenario of a six-month extension in QE in its current form does not mean that <strong>there will be no robust discussion about more hawkish choices, such as tapering or a reduction in the monthly asset purchases </strong>as the hawks on the GC will push for a reduction in QE, pointing to the relatively robust Eurozone economic data, rising inflation, and the weaker Euro. UBS notes, however, <strong>the conservative part of the Governing Council might be weakened on 8 December as the Dutch and Slovakian central bank governors will not be able to vote</strong>.</p>
<p>On the all important topic of whether the ECB will taper, UBS says that after September 2017, the time will come for the ECB to start scaling back the QE programme through tapering. The decision might potentially be taken as early as 8 June 2017 (or otherwise 7 September), along with an updated set of macro forecasts for 2017-19. As shown in Figure 1, "tapering" could take various forms, with different speeds, degrees of flexibility, and strength of forward guidance – and hence hawkishness. The base-case assumption is that the ECB would wind down the QE programme over the course of one year, from October 2017 to the fall of 2018. <strong>If and when the tapering process starts, the ECB will have to take great care not to create a major "tantrum" in the markets, with significant rises in bonds yields and losses in risk assets</strong>. Hence, the ECB will likely adopt a flexible framework where it does not commit too strongly to a pre-determined pattern of winding down QE.</p>
<p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/11/29/ECB%20UBS%201.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/11/29/ECB%20UBS%201_0.jpg" width="500" height="284" /></a></p>
<p>Still, with inflation around the globe, if only according to various market indicators such as 5y5Y forward, ascendent around the world and in Europe, what happens if the hawks win the upper hand? The answer is shown in the following table laying out the ECB's "menu" options for monetary policy normalization and tightening.</p>
<p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/11/29/ECB%20UBS%202%20menu.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/11/29/ECB%20UBS%202%20menu_0.jpg" width="500" height="274" /></a></p>
<p>On the topic of rate moves, UBS says that its base-case scenario implies that ECB policy rates have bottomed out, with the depo rate at -0.4%, the refi rate at zero, and the marginal lending rate at 0.25%. However, the ECB has explicitly stated that rate hikes should only be expected once the QE programme has come to an end. Assuming that QE will run until the fall of 2018, we think that ECB policy rates will remain at current levels until (at least) 2019.</p>
<p>UBS' Conclusion – the market has largely priced in its base case: </p>
<blockquote><div class="quote_start">
<div></div>
</div>
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<p>"we see a clear need for the ECB to act next week to maintain its accommodative stance via an extension of QE and ensure the implementation of purchases via changes to the technical parameters of the APP. In our opinion, <strong>the most likely changes to the QE design will be the removal of the deposit rate floor for QE purchases alongside an increase in ISIN/issuer limits on non-CAC bonds. These changes should be sufficient to implement QE purchases at least throughout 2017 in our view</strong>. Politically controversial adjustments to or deviations from the PSPP allocation key remain unlikely at the current stage. In general, we think the market is well priced for our baseline expectation and we stick to our views outlined in the 2017 Markets Outlook. Our strategic focus remains on steeper curves and gradually higher Bund yields. In terms of the risk scenario for next week's GC meeting, we see some risks that a hesitation or a delay from the ECB to extend QE fosters unwarranted monetary policy tightening and will lead to a deterioration of risk sentiment alongside a flattening of core EGB curves driven by the front-end. EGB spreads vs. Bunds are unlikely to be hugely supported by changes to the PSPP allocation key and remain subject to political developments with the Italian referendum being the next sign-post."</p>
</blockquote>
<p>One thing to note having read all three reports is that virtually every bank is positioned exceptionally dovish, and expects virtually no hawkish surprises out of the ECB. Which means that if there is a surprise, the pain trade will be for the EUR to rise sharply higher from its recent levels, although what complicates a simple long EUR trade is today's dramatic short squeeze in EUR pairs, after expectations of a far more dire market reaction to the Italian referendum, which however did not materialize, promptly a 300 pip move higher in the EURUSD, rising as high as 1.08, after dipping to 1.05 overnight.</p>
<p>In any event, all eyes are now on Draghi and what the former Goldman banker reveals in three days. </p>
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http://www.zerohedge.com/news/2016-12-05/look-weeks-other-big-event-what-expect-mario-draghi-thursday#commentsBank of AmericaBank of AmericaBank of JapanBondBusinessCentral banksDeutsche BankECB Governing CouncilEconomyEconomy of the European UnionEuroEurogroupEuropean Central BankEuropean ParliamentEurozoneEurozoneFinancial crisis of 2007–2008German governmentGoverning CouncilItalyMario DraghiMonetary PolicyOutput GapQuantitative easingReutersSlovakian central bankStock market crashesVolatilityYield CurveMon, 05 Dec 2016 20:33:40 +0000Tyler Durden579639 at http://www.zerohedge.comKey Events In The Coming Weeks: Italy Aftermath, ECB, ISM, Consumer Confidencehttp://www.zerohedge.com/news/2016-12-05/key-events-coming-weeks-italy-aftermath-ecb-ism-consumer-confidence
<p>The key economic releases this week are ISM non-manufacturing on Monday and University of Michigan consumer sentiment index on Friday. There are a few scheduled speaking engagements from Fed officials this week. </p>
<p>Away from the US economic calendar, initially focus will be on the Italian referendum result, which already appears to have been largely digested by the market, despite a variety of unknown consequences still to emerge. It will then shift quickly to a critical ECB meeting. </p>
<p>As BofA notes, Mario Draghi's interview in El Pais on the last day before the ECB starts its pre-meeting "quiet period" sets the landscape quite clearly. The decisions will come next week (in direct contrast with those who advocated waiting until January), tapering "proper" (i.e., winding down the programme) is not on the table, and the discussion on QE ultimately boils down to either continuing with the current pace of buying of EUR80bn for a relatively short period of time, or reducing the pace but buying for a longer period of time. Draghi did not hint at any personal preference there. It seems that both options would be consistent with "preserving the very substantial degree of monetary accommodation" that is needed.</p>
<p>BofA, as well as Goldman and many other banks, expect Draghi to continue monetizing debt at a pace of €80bn per month until Sept. 2017 at the earliest, with flexibility on the capital key and moving the issue limit on non-CAC bonds.</p>
<p>Back to key economic events, the breakdown is as follows:</p>
<ul>
<li>In the US we have ISM survey, trade balance, durable goods, wholesale inventories and U.Michigan index. Fed speakers currently on schedule are concentrated on Monday.</li>
<li>In the Eurozone, beyond the Italian referendum result and the ECB important releases include Eurozone PMIs (Final), October retail sales and 3Q GDP (Final).</li>
<li>In the UK, the main releases are PMIs, industrial production, trade balance and housing.</li>
<li>We also highlight the court hearings concerning government’s appeal against A50 ruling.</li>
<li>In Australia, the focus is on the RBA meeting as well as on the economic releases including trade balance, GDP and foreign reserves.</li>
<li>In Japan, we await releases on PMIs, GDP, trade balance and money supply.</li>
<li>In China, the main releases are trade balance and inflation.</li>
</ul>
<p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/11/29/knowns%20table.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/11/29/knowns%20table_0.jpg" width="500" height="565" /></a></p>
<p>* * * </p>
<p>A quick look at the global week ahead on a daily basis:</p>
<ul>
<li>This morning in Europe we’re kicking off the week with the remainder of the November PMI’s which includes the final services and composite revisions for the Euro area, Germany and France, as well as a first look at the data for the UK and non-core. Euro area retail sales data for the month of October is also out today. In the US we’ll get the remaining PMI’s as well as the ISM non-manufacturing print for November and labour market conditions index. </li>
<li>Tuesday kicks off in Germany with the latest factory orders data before we then get the final Q3 GDP reading for the Euro area. In the US tomorrow we’ll get the October trade balance reading, Q3 unit labour costs and nonfarm productivity, October factory orders, December IBD/TIPP economic optimism reading and the final durable and capital goods orders revisions. </li>
<li>Germany gets things going again on Wednesday when we’ll get the latest industrial production report. French trade data and UK industrial and manufacturing production will also be released. The only data due out in the US on Wednesday is JOLTS job openings and consumer credit for October. China will also release November foreign reserves data at some stage. </li>
<li>The early data to get things going on Thursday comes from Japan where the final Q3 GDP reading will be released. China will then be following with important November trade data. There’s no data in Europe on Thursday but all eyes will be on the main event of the week, the ECB policy meeting outcome just after midday. The only data out of the US on Thursday will be initial jobless claims. </li>
<li>We close out the week in Asia on Friday with the November CPI and PPI prints in China. In Europe we’ll get trade data in Germany, industrial production data in France and trade data in the UK. Over in the US we’ll get the final October wholesale inventories report along with a first look at the University of Michigan consumer sentiment report. Away from the data the Fedspeak this week all comes today with Dudley, Evans and Bullard scheduled.</li>
</ul>
<p>* * * </p>
<p><em>Finally, here is a full summary of key US events, together with consensus and estimates from Goldman Sachs</em><br /><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/11/29/bofa%20weekly%20chart.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/11/29/bofa%20weekly%20chart_0.jpg" width="500" height="260" /></a></p>
<p><span style="text-decoration: underline;"><strong>Monday, December 5 </strong></span></p>
<ul>
<li><strong>08:30 AM New York Fed President Dudley (FOMC voter) speaks:</strong> New York Fed President William Dudley will give a speech on the economic outlook at the Association for a Better New York.</li>
<li><strong>09:11 AM Chicago Fed President Evans (FOMC non-voter) speaks: </strong>Chicago Fed President Charles Evans will give a speech at the Executives’ Club of Chicago’s CEO Breakfast. Audience and media Q&amp;A is <strong>expected.</strong></li>
<li><strong>09:45 AM Markit Flash US Services PMI, November final (consensus 54.7, last 54.7)</strong></li>
<li><strong>10:00 AM Labor market conditions index, November (consensus -0.2, last +0.7)</strong></li>
<li><strong>10:00 AM ISM non-manufacturing, November (GS 55.0, consensus 55.5, last 54.8):</strong> We expect the ISM non-manufacturing index to edge up to 55.0 in the November report, up from 54.8. While non-manufacturing surveys were mixed at the headline level, underlying details from the reports suggest that business activity improved modestly on net in November. The Dallas Fed (+9.6pt to +12.6) and the New York Fed (+6.4pt to -6.8, not seasonally adjusted) service sector surveys both strengthened, while the Philly Fed (-10.7pt to +10.6) and Richmond Fed (-4pt to +3) surveys softened. The Markit Services PMI also ticked down in November. Our non-manufacturing tracker stands at 53.3 for November, from 52.9 in October.</li>
<li><strong>02:05 PM St. Louis Fed President Bullard (FOMC voter) speaks:</strong> St. Louis Fed President Bullard will give a speech on the U.S. economy and monetary policy at the W.P. Carey School of Business’ Economic Forecast luncheon at Arizona State University. Media Q&amp;A is expected.</li>
</ul>
<p><span style="text-decoration: underline;"><strong>Tuesday, December 6 </strong></span></p>
<ul>
<li><strong>08:30 AM Trade balance, October (GS -$41.1bn, consensus -$42.0bn, last -$36.4bn):</strong> We expect the trade balance to widen in October to -$41.1bn. The Census Bureau’s new Advance Economic Indicators report showed a larger than anticipated trade deficit in October.</li>
<li><strong>08:30 AM Nonfarm productivity, Q3 final (GS +3.4%, consensus +3.3%, last +3.1%): Unit labor costs (qoq), Q3 final (GS +0.8%, consensus +0.3%, last +0.3%):</strong> We expect Q3 nonfarm productivity to be revised up to +3.4% (qoq ar) from 3.1%, primarily reflecting upward revisions to output. Unit labor costs are likely to be revised up to 0.8%.</li>
<li><strong>10:00 AM Factory orders, October (GS +2.9%, consensus +2.5%, last +0.3%):</strong> Factory orders likely moved up in October, following last week’s durable goods report which showed new durable goods orders were firmer than expected.</li>
<li><strong>10:00 AM Durable goods orders, October final (consensus +4.8%, last +4.8%); Durable goods orders ex-transportation, October final (last +1.0%); Core capital goods orders, October final (last +0.4%); Core capital goods shipments, October final (last +0.2%)</strong></li>
</ul>
<p><span style="text-decoration: underline;"><strong>Wednesday, December 7 </strong></span></p>
<ul>
<li><strong>10:00 AM JOLTS job openings, October (consensus 5,445, last 5,486):</strong> Consensus expects job openings to edge down in October following a slight gain in the September report. The layoff and discharge rate moved down to an all-time low for the series.</li>
<li><strong>03:00 PM Consumer credit, October (consensus $18.5bn, last $19.3bn)</strong></li>
</ul>
<p><span style="text-decoration: underline;"><strong>Thursday, December 8 </strong></span></p>
<ul>
<li><strong>08:30 AM Initial jobless claims, week ended December 3 (GS 260k, consensus 255k, last 268k): Continuing jobless claims, week ended November 26 (consensus 2,048k, last 2,081k): </strong>We expect initial jobless claims to decrease to 260k from 268k last week. Last week, initial claims rose more than expected, most likely due to temporary volatility resulting from the Thanksgiving holiday during the reference week.</li>
</ul>
<p><span style="text-decoration: underline;"><strong>Friday, December 9 </strong></span></p>
<ul>
<li><strong>10:00 AM Wholesale inventories, October final (consensus -0.4%, last -0.4%)</strong></li>
<li><strong>10:00 AM University of Michigan consumer sentiment, December preliminary (GS 94.5, consensus 94.4, last 93.8):</strong> We expect the University of Michigan consumer sentiment index to increase further to 94.5 in the December preliminary estimate, following an improvement in the November report. The Conference Board’s consumer confidence index jumped to a new cyclical high in the December report.</li>
</ul>
<p><em>Source: BofA, Goldman, DB</em></p>
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http://www.zerohedge.com/news/2016-12-05/key-events-coming-weeks-italy-aftermath-ecb-ism-consumer-confidence#commentsArizona State UniversityAssociation for a Better New YorkAustraliaBureau of the CensusBusinessChicago FedChinaConference BoardConsumerConsumer ConfidenceConsumer confidenceConsumer CreditConsumer SentimentCPIDallas FedDallas FedEconomic CalendarEconomic indicatorsEconomy of the United StatesEuropean Central BankEurozoneExecutives’ Club of Chicagofederal governmentFederal Reserve SystemflashFranceGermanygoldman sachsGoldman SachsIndex numbersInitial Jobless ClaimsItalyJapanMarket ConditionsMarkitMichiganMonetary PolicyMoney SupplyNew York FedNew York FedPhilly FedReserve Bank of AustraliaRichmond FedSt Louis FedSt. Louis FedTrade BalanceTrade DeficitUN CourtUniversity Of MichiganUniversity of MichiganVolatilityW.P. Carey School of BusinessW.P.CareyWholesale InventoriesWilliam DudleyMon, 05 Dec 2016 13:43:39 +0000Tyler Durden579584 at http://www.zerohedge.com